6698 Federal Register / Vol. 65, No. 28 / Thursday, February 10, 2000 / Rules and Regulations

ENVIRONMENTAL PROTECTION

AGENCY

40 CFR Parts 80, 85, and 86

[AMS–FRL–6516–2]

RIN 2060–AI23

Control of Air Pollution From New

Motor Vehicles: Tier 2 Motor Vehicle

Emissions Standards and Gasoline

Sulfur Control Requirements

AGENCY: Environmental Protection

Agency (EPA).

ACTION: Final rule.

SUMMARY: Today’s action finalizes a

major program designed to significantly

reduce the emissions from new

passenger cars and light trucks,

including pickup trucks, vans,

minivans, and sport-utility vehicles.

These reductions will provide for

cleaner air and greater public health

protection, primarily by reducing ozone

and PM pollution. The program is a

comprehensive regulatory initiative that

treats vehicles and fuels as a system,

combining requirements for much

cleaner vehicles with requirements for

much lower levels of sulfur in gasoline.

A list of major highlights of the program

appears at the beginning of the

SUPPLEMENTARY INFORMATION section of

this Federal Register.

The program we are finalizing today

will phase in a single set of tailpipe

emission standards that will, for the first

time, apply to all passenger cars, light

trucks, and larger passenger vehicles

operated on any fuel. This set of ‘‘Tier

2 standards’’ is feasible and the use of

a single set of standards is appropriate

because of the increased use of light

trucks for personal transportation. The

miles traveled in light trucks is

increasing and the emissions from these

vehicles are thus an increasing problem.

This approach builds on the recent

technology improvements resulting

from the successful National LowEmission Vehicles (NLEV) program.

To enable the very clean Tier 2

vehicle emission control technology to

be introduced and to maintain its

effectiveness, we are also requiring

reduced gasoline sulfur levels

nationwide. The reduction in sulfur

levels will also contribute directly to

cleaner air in addition to its beneficial

effects on vehicle emission control

systems. Refiners will generally install

additional refining equipment to remove

sulfur in their refining processes.

Importers of gasoline will be required to

import and market only gasoline

meeting the sulfur standards. Today’s

action also introduces an averaging,

banking, and trading program to provide

flexibility for refiners and ease

implementation of the gasoline sulfur

control program.

The overall program focuses on

reducing the passenger car and light

truck emissions most responsible for

causing ozone and particulate matter

problems. Without today’s action, we

project that emissions of nitrogen oxides

from these vehicles will represent as

much as 40 percent of this ozoneforming pollutant in some cities, and

almost 20 percent nationwide, by the

year 2030.

Today’s program will bring about

major reductions in annual emissions of

these pollutants and also reduce the

emissions of sulfur compounds

resulting from the sulfur in gasoline. For

example, we project a reduction in

oxides of nitrogen emissions of at least

856,000 tons per year by 2007 and

1,236,000 by 2010, the time frame when

many states will have to demonstrate

compliance with air quality standards.

Emission reductions will continue

increasing for many years, reaching at

least 2,220,000 tons per year in 2020

and continuing to rise further in future

years. In addition, the program will

reduce the contribution of vehicles to

other serious public health and

environmental problems, including

VOC, PM, and regional visibility

problems, toxic air pollutants, acid rain,

and nitrogen loading of estuaries.

Furthermore, we project that these

reductions, and their resulting

environmental benefits, will come at an

average cost increase of less than $100

per passenger car, an average cost

increase of less than $200 for light

trucks, and an average cost increase of

about $350 for medium-duty passenger

vehicles, and an average increase of less

than 2 cents per gallon of gasoline (or

about $120 over the life of an average

vehicle).

DATES: This rule is effective April 10,

2000.

The incorporation by reference of

certain publications contained in this

rule are approved by the Director of the

Federal Register as of April 10, 2000.

ADDRESSES: Comments: All comments

and materials relevant to today’s action

have been placed in Public Docket No.

A–97–10 at the following address: U.S.

Environmental Protection Agency

(EPA), Air Docket (6102), Room M–

1500, 401 M Street, S.W., Washington,

D.C. 20460. EPA’s Air Docket makes

materials related to this rulemaking

available for review at the above address

(on the ground floor in Waterside Mall)

from 8:00 a.m. to 5:30 p.m., Monday

through Friday, except on government

holidays. You can reach the Air Docket

by telephone at (202) 260–7548 and by

facsimile at (202) 260–4400. We may

charge a reasonable fee for copying

docket materials, as provided in 40 CFR

Part 2.

FOR FURTHER INFORMATION CONTACT:

Carol Connell, U.S. EPA, National

Vehicle and Fuels Emission Laboratory,

2000 Traverwood, Ann Arbor MI 48105;

Telephone (734) 214–4349, FAX (734)

214–4816, E-mail

connell.carol@epa.gov.

SUPPLEMENTARY INFORMATION:

Highlights of the Tier2/Gasoline Sulfur

Program

For cars, and light trucks, and larger

passenger vehicles, the program will—

• Starting in 2004, through a phasein, apply for the first time the same set

of emission standards covering

passenger cars, light trucks, and large

SUVs and passenger vehicles. These

emission levels (‘‘Tier 2 standards’’) are

feasible for these vehicles. The Tier 2

standards are also appropriate because

of the increased use of light trucks for

personal transportation—the miles

traveled in light trucks is increasing and

the emissions from these vehicles are

thus an increasing problem.

• Introduce a new category of

vehicles, ‘‘medium-duty passenger

vehicles,’’ thus bringing larger passenger

vans and SUVs into the Tier 2 program.

• During the phase-in, apply interim

fleet emission average standards that

match or are more stringent than current

federal and California ‘‘LEV I’’ (LowEmission Vehicle, Phase I) standards.

• Apply the same standards to

vehicles operated on any fuel.

• Allow auto manufacturers to

comply with the very stringent new

standards in a flexible way while

ensuring that the needed environmental

benefits occur.

• Build on the recent technology

improvements resulting from the

successful National Low-Emission

Vehicles (NLEV) program and improve

the performance of these vehicles

through lower sulfur gasoline.

• Set more stringent particulate

matter standards.

• Set more stringent evaporative

emission standards.

For commercial gasoline, the program

will—

• Significantly reduce average

gasoline sulfur levels nationwide as

early as 2000, fully phased in in 2006.

Refiners will generally add refining

equipment to remove sulfur in their

refining processes. Importers of gasoline

will be required to import and market

only gasoline meeting the sulfur limits.

Federal Register / Vol. 65, No. 28 / Thursday, February 10, 2000 / Rules and Regulations 6699

• Provide for flexible implementation

by refiners through an averaging,

banking, and trading program.

• Encourage early introduction of

cleaner fuel into the marketplace

through an early sulfur credit and

allotment program.

• Apply temporary gasoline sulfur

standards to certain small refiners and

gasoline marketed in a limited

geographic area in the western U.S.

• Enable the new Tier 2 vehicles to

meet the emission standards by greatly

reducing the degradation of vehicle

emission control performance from

sulfur in gasoline. Lower sulfur gasoline

also appears to be necessary for the

introduction of advanced technologies

that promise higher fuel economy but

are very susceptible to sulfur poisoning

(for example, gasoline direct injection

engines).

• Reduce emissions from NLEV

vehicles and other vehicles already on

the road.

Regulated Entities

This action will affect you if you

produce new motor vehicles, alter

individual imported motor vehicles to

address U.S. regulation, or convert

motor vehicles to use alternative fuels.

It will also affect you if you produce,

distribute, or sell gasoline motor fuel.

The table below gives some examples

of entities that may have to comply with

the regulations. But because these are

only examples, you should carefully

examine these and existing regulations

in 40 CFR parts 80 and 86. If you have

questions, call the person listed in the

FOR FURTHER INFORMATION CONTACT

section above.

Category NAICS codes a SIC Codes b Examples of potentially regulated entities

Industry ......................................................................... 336111 3711 Motor Vehicle Manufacturers.

336112

336120

Industry ......................................................................... 336311 3592 Alternative fuel vehicle converters.

336312 3714

422720 5172

454312 5984

811198 7549

541514 8742

541690 8931

Industry ......................................................................... 811112 7533 Commercial Importers of Vehicles and Vehicle Components.

811198 7549

541514 8742

Industry ......................................................................... 324110 2911 Petroleum Refiners.

Industry ......................................................................... 422710 5171 Gasoline Marketers and Distributors.

422720 5172

Industry ......................................................................... 484220 4212 Gasoline Carriers.

484230 4213

a North American Industry Classification System (NAICS).

bStandard Industrial Classification (SIC) system code.

Access to Rulemaking Documents

Through the Internet

Today’s action is available

electronically on the day of publication

from the Office of the Federal Register

Internet Web site listed below.

Electronic copies of this preamble and

regulatory language as well as the

Response to Comments document, the

Regulatory Impact Analysis and other

documents associated with today’s final

rule are available from the EPA Office

of Mobile Sources Web site listed below

shortly after the rule is signed by the

Administrator. This service is free of

charge, except any cost that you already

incur for connecting to the Internet.

Federal Register Web Site: http://

www.epa.gov/docs/fedrgstr/epa-air/

(Either select a desired date or use the

Search feature.)

Office of Mobile Sources (OMS) Web

Site: http://www.epa.gov/oms/ (Look

in ‘‘What’s New’’ or under the

‘‘Automobiles’’ topic.)

Please note that due to differences

between the software used to develop

the document and the software into

which the document may be

downloaded, changes in format, page

length, etc., may occur.

Outline of This Preamble

I. Introduction

A. What Are the Basic Components of the

Program?

1. Vehicle Emission Standards

2. Gasoline Sulfur Standards

B. What Is Our Statutory Authority for

Today’s Action?

1. Light-Duty Vehicles and Trucks

2. Gasoline Sulfur Controls

C. The Tier 2 Study and the Sulfur Staff

Paper

D. Relationship of Diesel Fuel Sulfur

Control to the Tier 2/Gasoline Sulfur

Program

II. Tier 2 Determination

A. There Is a Substantial Need for Further

Emission Reductions in Order To Attain

and Maintain National Ambient Air

Quality Standards

B. More Stringent Standards for Light-Duty

Vehicles and Trucks Are Technologically

Feasible

C. More Stringent Standards for Light-Duty

Vehicles and Trucks Are Needed and

Cost Effective Compared to Available

Alternatives

III. Air Quality Need For and Impact of

Today’s Action

A. Americans Face Serious Air Quality

Problems That Require Further Emission

Reductions

B. Ozone

1. Background on Ozone Air Quality

2. Additional Emission Reductions Are

Needed To Attain and Maintain the

Ozone NAAQS.

a. Summary

b. Ozone Modeling Presented in Our

Proposal and Supplemental Notice

c. Updated and Additional Ozone

Modeling

d. Results and Conclusions

e. Issues and Comments Addressed

f. 8-Hour Ozone

3. Cars and Light-Duty Trucks Are a Big

Part of the NOX and VOC Emissions, and

Today’s Action Will Reduce This

Contribution Substantially

4. Ozone Reductions Expected From This

Rule

C. Particulate Matter

1. Background on PM

2. Need for Additional Reductions to

Attain and Maintain the PM10 NAAQS

3. PM25 Discussion

4. Emission Reductions and Ambient PM

Reductions

D. Other Criteria Pollutants: Carbon

Monoxide, Nitrogen Dioxide, Sulfur

Dioxide

E. Visibility

6700 Federal Register / Vol. 65, No. 28 / Thursday, February 10, 2000 / Rules and Regulations

F. Air Toxics

G. Acid Deposition

H. Eutrophication/Nitrification

I. Cleaner Cars and Light Trucks Are

Critically Important to Improving Air

Quality

IV. What Are the New Requirements for

Vehicles and Gasoline?

A. Why Are We Proposing Vehicle and

Fuel Standards Together?

1. Feasibility of Stringent Standards for

Light-Duty Vehicles and Light-Duty

Trucks a. Gasoline Fueled Vehicles i.

LDVs and LDT1s–LDT4s ii. MediumDuty Passenger Vehicles (MDPVs) b.

Diesel Vehicles

2. Gasoline Sulfur Control Is Needed To

Support the Proposed Vehicle Standards

a. How Does Gasoline Sulfur Affect

Vehicle Emission Performance? b. How

Large Is Gasoline Sulfur’s Effect on

Emissions? c. Sulfur’s Negative Impact

on Tier 2 Catalysts d. Sulfur Has

Negative Impacts on OBD Systems

B. Our Program for Vehicles

1. Overview of the Vehicle Program a.

Introduction b. Corporate Average NOx

Standard c. Tier 2 Exhaust Emission

Standard ‘‘Bins’ d. Schedules for

Implementation i. Implementation

Schedule for Tier 2 LDVs and LLDTs ii.

Implementation Schedule for Tier 2

HLDTs e. Interim Standards i. Interim

Exhaust Emission Standards for LDV/

LLDTs ii Interim Exhaust Emission

Standards for HLDTs iii. Interim

Programs Will Provide Reductions Over

Previous Standards f. Generating,

Banking, and Trading NOx Credits

2. Why Are We Finalizing the Same Set of

Standards for Tier 2 LDVs and LDTs?

3. Why Are We Finalizing the Same

Standards for Both Gasoline and Diesel

Vehicles?

4. Key Elements of the Vehicle Program a.

Basic Exhaust Emission Standards and

‘‘Bin’’ Structure i. Why Are We

Including Extra Bins? b. The Program

Will Phase In the Tier 2 Vehicle

Standards Over Several Years i. Primary

Phase-in Schedule

ii. Alternative Phase-in Schedule

c. Manufacturers Will Meet a ‘‘Corporate

Average’’ NOX Standard

d. Manufacturers Can Generate, Bank, and

Trade NOX Credits

i. General Provisions

ii. Averaging, Banking and Trading of NOX

Credits Fulfills Several Goals

iii. How Manufacturers Can Generate and

Use NOX Credits

iv. Manufacturers Can Earn and Bank

Credits for Early NOX Reductions

v. Tier 2 NOX Credits Will Have Unlimited

Life

vi. NOX Credit Deficits Can Be Carried

Forward

vii. Encouraging the Introduction of Ultra

Clean Vehicles

e. Interim Standards

i. Interim Exhaust Emission Standards for

LDV/LLDTs

ii. Interim Exhaust Emission Standards for

HLDTs

f. Light-Duty Evaporative Emission

Standards

g. Passenger Vehicles Above 8,500 Pounds

GVWR

C. Our Program for Controlling Gasoline

Sulfur

1. Gasoline Sulfur Standards for Refiners

and Importers

a. Standards and Deadlines That Refiners/

Importers Must Meet

i. What Are the Per-Gallon Caps on

Gasoline Sulfur Levels in 2004 and

Beyond?

ii. What Standards Must Refiners/

Importers Meet on a Corporate Average

Basis?

iii. What Standards Must Be Met by

Individual Refineries/Importers?

b. Standards and Deadlines for Refiners/

Importers Which Provide Gasoline to the

Geographic Phase-in Area (GPA)

i. Justification for Our Geographic Phase-in

Approach

ii. What Is the Geographic Phase-in Area

and How Was It Established?

iii. Standards/Deadlines for Gasoline Sold

in the Geographic Phase-in Area

iv. What Are the Per-Gallon Caps on

Gasoline Sulfur Levels in the Phase-in

Area?

v. How Do Refiners/Importers Account for

GPA Fuel in Their Corporate Average

Calculations?

vi. How Do Refiners/Importers Apply for

the Geographic Phase-in Area Standards?

vii. How Will EPA Establish the GPA in

Adjacent States?

c. How Does the Sulfur Averaging,

Banking, and Trading Program Work?

i. Generating Allotments Prior to 2004

ii. Generating Allotments in 2004 and 2005

iii. Using Allotments in 2004 and 2005

iv. How Long Do Allotments Last?

v. Establishing Individual Refinery Sulfur

Baselines for Credit Generation Purposes

vi. Generating Sulfur Credits Prior to 2004

vii. Generating Sulfur Credits in 2004 and

Beyond

viii. Using Sulfur Credits

ix. How Long Do Credits Last?

x. Conversion of Allotments Into Credits

d. How are State Sulfur Programs Affected

by EPA’s Program?

2. Hardship Provision for Qualifying

Refiners

a. Hardship Provision for Qualifying Small

Refiners

i. How Are Small Refiners Defined?

ii. Standards That Small Refiners Must

Meet

iii. How Do Small Refiners Apply for Small

Refiner Status?

iv. How Do Small Refineries Apply for a

Sulfur Baseline?

v. Volume Limitation on Use of a Small

Refinery Standard

vi. Extensions Beyond 2007 for Small

Refiners

vii. Can Small Refiners Participate in the

ABT Program?

b. Temporary Waivers From Low Sulfur

Requirements in Extreme Unforeseen

Circumstances

c. Temporary Waivers Based on Extreme

Hardship Circumstances

3. Streamlining of Refinery Air Pollution

Permitting Process

a. Brief Summary of Proposal

b. Significant Comments Received

c. Today’s Action

i. Major New Source Review

ii. Environmental Justice

D. What Are the Economic Impacts, Cost

Effectiveness and Monetized Benefits of

the Tier 2 Program?

1. What Are the Estimated Costs of the

Vehicle Standards?

2. Estimated Costs of the Gasoline Sulfur

Standards

3. What Are the Aggregate Costs of the Tier

2/Gasoline Sulfur Final Rule?

4. How Does the Cost-Effectiveness of This

Program Compare to Other Programs?

a. Cost Effectiveness of this Program

b. How Does the Cost Effectiveness of This

Program Compare With Other Means of

Obtaining Mobile Source NOX+NMHC

Reductions?

c. How Does the Cost Effectiveness of This

Program Compare With Other Known

Non-Mobile Source Technologies for

Reducing NOX+NMHC?

5. Does the Value of the Benefits Outweigh

the Cost of the Standards?

a. What Is the Purpose of This Benefit-Cost

Comparison?

b. What Was Our Overall Approach to the

Benefit-Cost Analysis?

c. What Are the Significant Limitations of

the Benefit-Cost Analysis?

d. How Was the Benefit-Cost Analysis

Changed From Proposal?

e. How Did We Perform the Benefit-Cost

Analysis?

f. What Were the Results of the BenefitCost Analysis?

V. Other Vehicle-Related Provisions

A. Final Tier 2 CO, HCHO and PM

Standards

1. Carbon Monoxide (CO) Standards

2. Formaldehyde (HCHO) Standards

3. Use of NMHC Data To Show Compliance

With NMOG Standards; Alternate

Compliance With Formaldehyde

Standards.

4. Particulate Matter (PM) Standards

B. Useful Life

1. Mandatory 120,000 Mile Useful Life

2. 150,000 Mile Useful Life Certification

Option

C. Supplemental Federal Test Procedure

(SFTP) Standards

1. Background

2. SFTP Under the NLEV Program

3. SFTP Standards for the Interim and Tier

2 LDVs and LDTs: As Proposed

4. Final SFTP Standards for Interim and

Tier 2 LDVs and LDTs

5. Adding a PM Standard to the SFTP

Standards

6. Future Efforts Relevant to SFTP

Standards

D. LDT Test Weight

E. Test Fuels

F. Changes to Evaporative Certification

Procedures to Address Impacts of

Alcohol Fuels

G. Other Test Procedure Issues

H. Small Volume Manufacturers

1. Special Provisions for Independent

Commercial Importers (ICIs)

2. Hardship Provision for Small Volume

Manufacturers

I. Compliance Monitoring and Enforcement

Federal Register / Vol. 65, No. 28 / Thursday, February 10, 2000 / Rules and Regulations 6701

1. Application of EPA’s Compliance

Assurance Program, CAP2000

2. Compliance Monitoring

3. Relaxed In-Use Standards for Vehicles

Produced During the Phase-in Period

4. Enforcement of the Tier 2 and Interim

Corporate Average NOX Standards.

J. Addressing Environmentally Beneficial

Technologies Not Recognized by Test

Procedures

K. Adverse Effects of System Leaks

L. The Future Development of Advanced

Technology and the Role of Fuels

M. Miscellaneous Provisions

VI. Gasoline Sulfur Program Compliance

and Enforcement Provisions

A. Overview

B. Requirements for Foreign Refiners and

Importers

1. Requirements for Foreign Refiners With

Individual Refinery Sulfur Standards or

Credit Generation Baselines

2. Requirements for Truck Importers

C. What Standards and Requirements

Apply Downstream?

D. Testing and Sampling Methods and

Requirements

1. Test Method for Sulfur in Gasoline

2. Test Method for Sulfur in Butane

3. Quality Assurance Testing

4. Requirement to Test Every Batch of

Gasoline Produced or Imported

5. Exceptions to the Every-Batch Testing

Requirement

6. Sampling Methods

7. Gasoline Sample Retention

Requirements

E. Federal Enforcement Provisions for

California Gasoline and for Use of

California Test Methods to Determine

Compliance

F. Recordkeeping and Reporting

Requirements

1. Product Transfer Documents

2. Recordkeeping Requirements

3. Reporting Requirements

G. Exemptions for Research, Development,

and Testing

H. Liability and Penalty Provisions for

Noncompliance

I. How Will Compliance With the Sulfur

Standards Be Determined?

VII. Public Participation

VIII. Administrative Requirements

A. Administrative Designation and

Regulatory Analysis

B. Regulatory Flexibility

1. Potentially Affected Small Businesses

2. Small Business Advocacy Review Panel

and the Evaluation of Regulatory

Alternatives

C. Paperwork Reduction Act

D. Intergovernmental Relations

1. Unfunded Mandates Reform Act

2. Executive Order 13084: Consultation

and Coordination With Indian Tribal

Governments

3. Executive Order 13132 (Federalism)

E. National Technology Transfer and

Advancement Act

F. Executive Order 13045: Children’s

Health Protection

G. Congressional Review Act

IX. Statutory Provisions and Legal Authority

I. Introduction

Since the passage of the 1990 Clean

Air Act Amendments, the U.S. has made

significant progress in reducing

emissions from passenger cars and light

trucks. The National Low-Emission

Vehicle (NLEV) and Reformulated

Gasoline (RFG) programs are important

examples of control programs that are in

place and will continue to help reduce

car and light-duty truck emissions into

the near future.

Nonetheless, due to increasing vehicle

population and vehicle miles traveled,

passenger cars and light trucks will

continue to be significant contributors

to air pollution inventories well into the

future. In fact, the emission contribution

of light trucks and sport utility vehicles

now matches that of passenger cars.

(This is occurring because of the

combination of growth in miles traveled

by light trucks and the fact that their

emission standards are currently less

stringent than those of passenger cars).

The program we describe below builds

on the NLEV and RFG Phase II programs

to develop a strong new national

program to protect public health and the

environment well into the next century.

The program, while reducing VOC and

other emissions, focuses especially on

NOX, because that is where the largest

air quality gains can be achieved.

We have followed several overarching

principles in developing this final rule:

• Design a strong national program

that will assist states in every region of

the country to meet their air quality

objectives and that will ensure that cars

and trucks continue to contribute a fair

share to our nation’s overall air quality

solutions;

• View vehicles and fuels as an

integrated system, recognizing that only

by addressing both can the best overall

emission performance be achieved;

• Establish a single set of emission

standards that apply regardless of the

fuel used and whether the vehicle is a

car, a light truck, or a larger passenger

vehicle;

• Provide compliance flexibilities

that allow vehicle manufacturers and oil

refiners to adjust to future market trends

and honor consumer preferences;

• Not preclude the development of

advanced low emission or fuel efficient

technologies such as lean-burn engines;

and

• Ensure sufficient leadtime for

phase-in of the Tier 2 and gasoline

sulfur program.

With these principles as background,

we turn now to an overview of the

vehicle and fuel aspects of the program.

Sections I and II of this preamble will

give you a brief overview of our program

and our rationale for implementing it.

Subsequent sections will expand on the

air quality need, technological

feasibility, economic impacts, and

provide a detailed description of the

specifics of the program. A public

participation section reviews the

process we followed in soliciting and

responding to public comment. The

final sections deal with several

administrative requirements. You may

also want to review our Final Regulatory

Impact Analysis (RIA) and our Response

to Comments document, both of which

are found in the docket and on the

Internet. They provide additional

analyses and discussions of many topics

raised in this preamble.

A. What Are the Basic Components of

the Program?

The nation’s air quality, while

certainly better than in the past, will

nevertheless continue to expose tens of

millions of Americans to unhealthy

levels of air pollution well into the

future in the absence of significant new

controls on emissions from motor

vehicles. EPA is therefore finalizing a

major, comprehensive program designed

to reduce emission standards for

passenger cars, light trucks, and large

passenger vehicles (including sportutility vehicles, minivans, vans, and

pickup trucks) and to reduce the sulfur

content of gasoline. Under the program,

automakers will produce vehicles

designed to have very low emissions

when operated on low-sulfur gasoline,

and oil refiners will provide that much

cleaner gasoline nationwide. In this

preamble, we refer to the

comprehensive program as the ‘‘Tier 2/

Gasoline Sulfur program.’’

1. Vehicle Emission Standards

Today’s action sets new federal

emission standards (‘‘Tier 2 standards’’)

for passenger cars, light trucks, and

larger passenger vehicles. The program

is designed to focus on reducing the

emissions most responsible for the

ozone and particulate matter (PM)

impact from these vehicles—nitrogen

oxides (NOX) and non-methane organic

gases (NMOG), consisting primarily of

hydrocarbons (HC) and contributing to

ambient volatile organic compounds

(VOC). The program will also, for the

first time, apply the same set of federal

standards to all passenger cars, light

trucks, and medium-duty passenger

vehicles. Light trucks include ‘‘light

light-duty trucks’’ (or LLDTs), rated at

less than 6000 pounds gross vehicle

weight and ‘‘heavy light-duty trucks’’

(or HLDTs), rated at more than 6000

6702 Federal Register / Vol. 65, No. 28 / Thursday, February 10, 2000 / Rules and Regulations

1A vehicle’s ‘‘Gross Vehicle Weight Rating,’’ or

GVWR, is the curb weight of the vehicle plus its

maximum recommended load of passengers and

cargo.

2By comparison, the NOX standards for the

National Low Emission Vehicle (NLEV) program,

which will be in place nationally in 2001, range

from 0.30 g/mi for passenger cars to 0.50 g/mi for

medium-sized light trucks (larger light trucks are

not covered). For further comparison, the standards

met by today’s Tier 1 vehicles range from 0.60 g/

mi to 1.53 g/mi.

3There are also NMOG standards associated with

both the interim and Tier 2 standards. The NMOG

standards vary depending on which of various

individual sets of emission standards manufacturers

choose to use in complying with the average NOX

standard. This ‘‘bin’’ approach is described more

fully in section IV.B. of this preamble.

4LDTs with a loaded vehicle weight less than or

equal to 3750 pounds, called LDT1s and LDT2s.

5Section 202(b)(1)(C) forbids EPA from

promulgating mandatory standards more stringent

than Tier 1 standards until the 2004 model year.

pounds gross vehicle weight).1

‘‘Medium-duty passenger vehicles’’ (or

MDPVs) form a new class of vehicles

introduced by this rule that includes

SUVs and passenger vans rated at

between 8,500 and 10,000 GVWR. The

program thus ensures that essentially all

vehicles designed for passenger use in

the future will be very clean vehicles.

The Tier 2 standards finalized today

will reduce new vehicle NOX levels to

an average of 0.07 grams per mile (g/mi).

For new passenger cars and light LDTs,

these standards will phase in beginning

in 2004, with the standards to be fully

phased in by 2007.2 For heavy LDTs and

MDPVs, the Tier 2 standards will be

phased in beginning in 2008, with full

compliance in 2009.

During the phase-in period from

2004–2007, all passenger cars and light

LDTs not certified to the primary Tier 2

standards will have to meet an interim

average standard of 0.30 g/mi NOX,

equivalent to the current NLEV

standards for LDVs and more stringent

than NLEV for LDT2s (e.g., minivans).3

During the period 2004–2008, heavy

LDTs and MDPVs not certified to the

final Tier 2 standards will phase in to

an interim program with an average

standard of 0.20 g/mi NOX, with those

not covered by the phase-in meeting a

per-vehicle standard (i.e., an emissions

‘‘cap’’) of 0.6 g/mi NOX (for HLDTs) and

0.9 g/mi NOX (for MDPVs). The average

standards for NOX will allow

manufacturers to comply with the very

stringent new standards in a flexible

way, assuring that the average emissions

of a company’s production meet the

target emission levels while allowing

the manufacturer to choose from several

more- and less-stringent emission

categories for certification.

We are also setting stringent

particulate matter standards that will be

especially important if there is

substantial future growth in the sales of

diesel vehicles. Before 2004, we are

establishing more stringent interim PM

standards for most light trucks than

exist now under NLEV. With higher

sales of diesel cars and light trucks, they

could easily contribute between onehalf and two percent of the PM10

concentration allowed by the NAAQS,

with some possibility that the

contribution could be as high as 5 to 40

percent in some roadside situations

with heavy traffic. These increases

would make attainment even more

difficult for 8 counties which we

already predict to need further emission

reductions even without an increase in

diesel sales, and would put at risk

another 18 counties which are now

within 10 percent of a NAAQS

violation. Thus, by including a more

stringent PM standard in the program

finalized today, we help address

environmental concerns about the

potential growth in the numbers of

light-duty diesels on the road—even if

that growth is substantial. The new

requirements also include more

stringent hydrocarbon controls (exhaust

NMOG and evaporative emissions

standards). We will also monitor the

progress of the development of

advanced technologies and the role of

fuels.

2. Gasoline Sulfur Standards

The other major part of today’s action

will significantly reduce average

gasoline sulfur levels nationwide. We

expect these reductions could begin to

phase in as early as 2000, with full

compliance for most refiners occurring

by 2006. Refiners will generally install

advanced refining equipment to remove

sulfur during the production of gasoline.

Importers of gasoline will be required to

import and market only gasoline

meeting the sulfur limits. Temporary,

less stringent standards will apply to a

few small refiners through 2007. In

addition, temporary, less stringent

standards will apply to a limited

geographic area in the western U.S. for

the 2004–2006 period.

This significant new control of

gasoline sulfur content will have two

important effects. The lower sulfur

levels will enable the much-improved

emission control technology necessary

to meet the stringent vehicle standards

of today’s rule to operate effectively

over the useful life of the new vehicles.

In addition, as soon as the lower sulfur

gasoline is available, all gasoline

vehicles already on the road will have

reduced emissions—from less

degradation of their catalytic converters

and from fewer sulfur compounds in the

exhaust.

Today’s action will encourage refiners

to reduce sulfur in gasoline as early as

2000. The program requires that most

refiners and importers meet a corporate

average gasoline sulfur standard of 120

ppm and a cap of 300 ppm beginning in

2004. By 2006, the cap will be reduced

to 80 ppm and most refineries must

produce gasoline averaging no more

than 30 ppm sulfur. The program builds

upon the existing regulations covering

gasoline composition as it relates to

emissions performance. It includes

provisions for trading of sulfur credits,

increasing the flexibility available to

refiners for complying with the new

requirements. We intend for the credit

program to ease compliance

uncertainties by providing refiners the

flexibility to phase in early controls in

2000–2003 and use credits gained in

these years to delay some control until

as late as 2006. As finalized today, the

program will achieve the needed

environmental benefits while providing

substantial flexibility to refiners.

B. What Is Our Statutory Authority for

Today’s Action?

1. Light-Duty Vehicles and Trucks

We are setting motor vehicle emission

standards under the authority of section

202 of the Clean Air Act. Sections 202(a)

and (b) of the Act provide EPA with

general authority to prescribe vehicle

standards, subject to any specific

limitations otherwise included in the

Act. Sections 202(g) and (h) specify the

current standards for LDVs and LDTs,

which became effective beginning in

model year 1994 (‘‘Tier 1 standards’’).

Section 202(i) of the Act provides

specific procedures that EPA must

follow to determine whether standards

more stringent than Tier 1 standards for

LDVs and certain LDTs 4 are appropriate

beginning between the 2004 and 2006

model years.5 Specifically, we are

required to first issue a study regarding

‘‘whether or not further reductions in

emissions from light-duty vehicles and

light-duty trucks should be required

* * *’’ (the ‘‘Tier 2 Study’’). This study

‘‘shall examine the need for further

reductions in emissions in order to

attain or maintain the national ambient

air quality standards.’’ It is also to

consider: (1) The availability of

technology to meet more stringent

standards, taking cost, lead time, safety,

and energy impacts into consideration;

and (2) the need for, and cost

effectiveness of, such standards,

including consideration of alternative

methods of attaining or maintaining the

national ambient air quality standards.

A certain set of ‘‘default’’ emission

Federal Register / Vol. 65, No. 28 / Thursday, February 10, 2000 / Rules and Regulations 6703

6LDTs that have gross vehicle weight ratings

above 6000 pounds are considered ‘‘heavy-duty

vehicles’’ under the Act. See section 202(b)(3). For

regulatory purposes, we refer to these LDTs as

‘‘heavy light-duty trucks’’ made up of LDT3s and

LDT4s. 7We currently have regulatory requirements for

conventional and reformulated gasoline adopted

under Sections 211(c) and 211(k) of the Act, in

addition to the ‘‘substantially similar’’ requirements

for fuel additives of Section 211(f). These

requirements have the effect of limiting sulfur

levels in gasoline to some extent. See the Final RIA

for more details.

8On April 28, 1998, EPA published a notice of

availability announcing the release of a draft of the

Tier 2 study and requesting comments on the draft.

The final report to Congress included a summary

and analysis of the comments EPA received.

standards for these vehicle classes is

among those options for new standards

that EPA is to consider.

After the study is completed and the

results are reported to Congress, EPA is

required to determine by rulemaking

whether: (1) There is a need for further

emission reductions; (2) the technology

for more stringent emission standards

from the affected classes is available;

and (3) such standards are needed and

cost-effective, taking into account

alternatives. If EPA answers ‘‘yes’’ to

these questions, then the Agency is to

promulgate new, more stringent motor

vehicle standards (‘‘Tier 2 standards’’).

EPA submitted its report to Congress

on July 31, 1998. Today’s final rule

makes affirmative responses to the three

questions above (see Section II below)

and sets new standards that are more

stringent than the default standards in

the Act.

EPA is also setting standards for larger

light-duty trucks and MDPVs under the

general authority of Section 202(a)(1)

and 202(b) and under Section 202(a)(3)

of the Act, which requires that

standards applicable to emissions of

hydrocarbons, NOX, CO and PM from

heavy-duty vehicles 6 reflect the greatest

degree of emission reduction available

for the model year to which such

standards apply, giving appropriate

consideration to cost, energy, and safety.

We are also setting standards for

formaldehyde under our authority in

sections 202(a) and (l).

2. Gasoline Sulfur Controls

We are adopting gasoline sulfur

controls pursuant to our authority under

Section 211(c)(1) of the Clean Air Act.7

Under Section 211(c)(1), EPA may adopt

a fuel control if at least one of the

following two criteria is met: (1) The

emission products of the fuel cause or

contribute to air pollution which may

reasonably be anticipated to endanger

public health or welfare; or (2) the

emission products of the fuel will

significantly impair emissions control

systems in general use or which will be

in general use were the fuel control to

be adopted.

We are adopting gasoline sulfur

controls based on both of these criteria.

Under the first criterion, we believe that

sulfur in gasoline used in Tier 1 and

LEV technology vehicles contributes to

ozone pollution, air toxics, and PM.

Under the second criterion, we believe

that gasoline sulfur in fuel will

significantly impair the emissions

control systems expected to be used in

Tier 2 technology vehicles, as well as

emissions control systems currently

used in LEVs. Please refer to Section

IV.C. below and to the Final Regulatory

Impact Analysis (RIA) for more details

of our analysis and findings. The RIA

includes a more detailed discussion of

EPA’s authority to set gasoline sulfur

standards, including a discussion of our

conclusions relating to the factors

required to be considered under Section

211(c).

C. The Tier 2 Study and the Sulfur Staff

Paper

On July 31, 1998, EPA submitted its

report to Congress containing the results

of the Tier 2 study.8 The study indicated

that in the 2004 and later time frame,

there will be a need for emission

reductions to aid in meeting and

maintaining the National Ambient Air

Quality Standards (NAAQS) for both

ozone and PM. Air quality modeling

showed that in the 2007–2010 time

frame, when Tier 2 standards will

become fully effective, a number of

areas will still be in nonattainment for

ozone and PM even after the

implementation of existing emission

controls. The study also noted the

continued existence of carbon monoxide

(CO) nonattainment areas. It also found

ample evidence that technologies will

be available to meet more stringent Tier

2 standards. In addition, the study

provided evidence that such standards

could be implemented at a similar cost

per ton of reduced pollutants as other

programs aimed at similar air quality

problems. Finally, the study identified

several additional issues in need of

further examination, including the

relative stringency of car and light truck

emission standards, the appropriateness

of identical versus separate standards

for gasoline and diesel vehicles, and the

effects of sulfur in gasoline on catalyst

efficiency. Section IV of this preamble

describes the steps we have taken to

follow up on the Tier 2 Study.

In addition, on May 1, 1998, EPA

released a staff paper presenting EPA’s

understanding of the impact of gasoline

sulfur on emissions from motor vehicles

and exploring what gasoline producers

and automobile manufacturers could do

to reduce sulfur’s impact on emissions.

The staff paper noted that gasoline

sulfur degrades the effectiveness of

catalytic converters and that high sulfur

levels in commercial gasoline could

affect the ability of future automobiles—

especially those designed for very low

emissions—to meet more stringent

standards in use. It also pointed out that

sulfur control will provide additional

benefits by lowering emissions from the

current fleet of vehicles.

D. Relationship of Diesel Fuel Sulfur

Control to the Tier 2/Gasoline Sulfur

Program

In the NPRM, we raised the question

of what if any changes to diesel fuel

may be needed to enable diesel vehicles

to meet the Tier 2 standards or any

future heavy-duty diesel engine

standards. Specifically, we raised the

question of whether diesel sulfur levels

need to be controlled. Since diesel fuel

controls of any kind would have an

impact on the refinery as a whole, and

since in some cases (including potential

diesel sulfur limits) could have

implications for gasoline sulfur control,

we requested comment on this issue in

our proposal. We also indicated that we

planned to release an Advance Notice of

Proposed Rulemaking to solicit more

information on this subject.

We published the ANPRM on May 13,

1999 (64 FR 26142). We are in the

process of considering all of the

comments received in response to the

ANPRM and plan to issue a Notice of

Proposed Rulemaking (NPRM) in early

spring of 2000. We received many

comments on the subject of diesel fuel

control along with the comments

submitted on the proposed Tier 2/

Gasoline Sulfur regulations. We have

prepared brief responses to some of

these comments in the Response to

Comments document, and will deal

fully with these comments as part of the

forthcoming NPRM on diesel fuel. We

are taking no action on diesel fuel as

part of today’s action.

II. Tier 2 Determination

Based on the statutory requirements

described above and the evidence

provided in the Tier 2 Study and since

its release, as described elsewhere in

this preamble, EPA has determined that

new, more stringent emission standards

are indeed needed, technologically

feasible, and cost effective.

6704 Federal Register / Vol. 65, No. 28 / Thursday, February 10, 2000 / Rules and Regulations

9The Final RIA contains a more detailed analysis,

and Section IV.A. below has further discussion of

the technological feasibility of our standards

including detailed discussions of the various

technology options that we believe manufacturers

may use to meet these standards.

A. There Is a Substantial Need for

Further Emission Reductions in Order to

Attain and Maintain National Ambient

Air Quality Standards

EPA finds that there is a clear air

quality need for new emission

standards, based on the continuing air

quality problems predicted to exist in

future years. As the discussion in

Section III.B. illustrates, 26 metropolitan

areas are each certain or highly likely to

need additional reductions. These areas

are distributed across most regions of

the U.S., and have a combined

population of over 86 million. Section

III.B. also shows that an additional 12

areas each has a moderate to significant

probability of needing additional

reductions, representing another 25

million people. This provides ample

evidence that further emission

reductions are needed to meet the 1-

hour ozone NAAQS.

In addition to these ozone concerns,

our analysis of PM10 monitoring data

and PM10 projections indicates that 15

PM10 nonattainment counties violated

the PM10 NAAQS in recent years, and

that 8 of them with a 1996 population

of almost 8 million have a high risk of

failing to attain and maintain without

more emission reductions. Eighteen

other counties, with a population of 23

million have a significant risk of failing

or are within 10 percent of violating the

PM10 NAAQS. It is also important to

recognize that nonattainment areas

remain for other criteria pollutants (e.g.,

CO) and that non-criteria pollution (e.g.,

air toxics and regional haze) also

contributes to environmental and health

concerns.

B. More Stringent Standards for LightDuty Vehicles and Trucks Are

Technologically Feasible

We find that emission standards

significantly more stringent than current

Tier 1 and National Low Emission

Vehicle (NLEV) levels are

technologically feasible. This is true

both for the LDVs and LDTs specifically

covered in section 202(i) and for the

medium-duty passenger vehicles also

included in today’s final rule.

Manufacturers are currently producing

NLEV vehicles that meet more stringent

standards than similar Tier 1 models.

Our analysis shows that mainly through

improvements in engine control

software and catalytic converter

technology, manufacturers can build

and are building durable vehicles and

trucks, including heavy light-duty

trucks, which have very low emission

levels.9 Section IV.A. below discusses

our feasibility conclusions in more

detail.

Many current production vehicles are

already certified at or near the Tier 2

standards. For year 2000 certification

(although not yet complete), over 50

vehicle models have emissions at or

below Tier 2 levels. In addition, we

performed a demonstration program at

our EPA laboratory that showed that

even large vehicles, which would be

expected to face the toughest challenges

reaching Tier 2 emission levels, can do

so with conventional technology.

Others, including the Manufacturers of

Emission Controls Association (MECA)

and the State of California, have also

performed demonstration programs,

with similar results. Manufacturers have

also certified LDVs and LDTs to NMOG

and CO levels as much as 80 percent

below Tier 1 standards. Furthermore, for

passenger vehicles greater than 8500 lbs

GVWR, we believe that by using

technologies and control strategies

similar to what will be used on lighter

vehicles, manufacturers will be able to

meet the Tier 2 emission standards.

Thus, we believe that, by the 2004–

2009 time frame, manufacturers will be

fully able to comply with the new Tier

2 emission standard levels. In addition,

to facilitate manufacturers’ efforts to

meet these new standards, the Tier 2

regulations include a phase-in over

several years and a corporate fleet

average NOX standard, which will allow

manufacturers to optimize the

deployment of technology across their

product lines with no loss of

environmental benefit. Our analysis of

the available technology improvements

and the very low emission levels

already being realized on these vehicles

leads us to find that the standards

adopted today are fully feasible for

LDVs and LDTs.

C. More Stringent Standards for LightDuty Vehicles and Trucks Are Needed

and Cost Effective Compared to

Available Alternatives

In this action, we also find that more

stringent motor vehicle standards are

both necessary and cost effective. As

discussed above, substantial further

reductions in emissions are needed to

help reduce the levels of unhealthy air

pollution to which millions of people

are being exposed; in particular, we

expect that a number of areas will not

attain or maintain compliance with the

National Ambient Air Quality Standards

for ozone and PM10 without such

reductions. (We describe this further in

Section III below and in the RIA.)

Furthermore, mobile sources are

important contributors to the air quality

problem. As we will explain more fully

later in this preamble, in the year 2030,

the cars and light trucks that are the

subject of today’s final rule are projected

to contribute as much as 40 percent of

the total NOX inventory in some cities,

and almost 20 percent of nationwide

NOX emissions. This situation would

have been considerably worse without

the NLEV program created by vehicle

manufacturers, EPA, the Northeastern

states, and others.

These emission reductions are clearly

necessary to meet and maintain the 1-

hour ozone NAAQS. We project that

while the emission reductions of this

program will lead to substantial

progress in meeting and maintaining the

NAAQS, many areas will still not come

into attainment even with this

magnitude of reductions.

We find that the Tier 2/Gasoline

Sulfur program is a reasonable, costeffective method of providing

substantial progress towards attainment

and maintenance of the NAAQS, costing

about $2000 per ton of NOX plus

hydrocarbon emissions reduced. This

program will reduce annual NOX

emissions by about 2.2 million tons per

year in 2020 and 2.8 million tons per

year in 2030 after the program is fully

implemented. By way of comparison,

when EPA established its 8-hour

NAAQS for ozone, we identified several

types of emission control programs that

were reasonably cost effective. If all of

the controls identified in that analysis

costing less than $10,000/ton were

implemented nationwide, they would

produce NOX emission reductions of

about 2.9 million tons per year. (That is,

to achieve about the same emission

reductions as the Tier 2/Gasoline Sulfur

program, other alternative measures

would have a significantly higher cost

per ton). These emission reductions are

clearly necessary to meet and maintain

the one-hour ozone NAAQS. We project

that while the emission reductions of

this program will lead to substantial

progress in meeting and maintaining the

NAAQS, many areas will still not come

into attainment even with this

magnitude of reductions.

In addition, the magnitude of

emission reductions that can be

achieved by a comprehensive national

Tier 2/Gasoline Sulfur program will be

difficult to achieve from any other

source category. Given the large

contribution that light-duty mobile

source emissions make to the national

emissions inventory and the range of

control programs ozone-affected areas

Federal Register / Vol. 65, No. 28 / Thursday, February 10, 2000 / Rules and Regulations 6705

10National Air Quality and Emissions Trend

Report, 1997, Air Quality Trends Analysis Group,

Office of Air Quality Planning and Standards, U.S.

Environmental Protection Agency, Research

Triangle Park, N.C., December 1998 (available on

the World Wide Web at http://www/epa.gov/oar/

aqtrnd97/). 11U.S. Environmental Protection Agency, Latest

Findings on National Air Quality: 1997 Status and

Trends. December 1998.

already have in place or would be

expected to implement, we believe it

will be very difficult, if not impossible,

to meet (and maintain) the ozone

NAAQS in a cost-effective manner

without large emission reductions from

LDVs and LDTs. We expect emissions

from MDPVs to also play an increasing

role.

Furthermore, we project that the Tier

2/Gasoline Sulfur program will

significantly reduce direct and

secondary particulate matter coming

from LDVs, LDTs, and MDPVs—by

about 36,000 tons per year of direct PM

alone by 2030; large secondary PM

reductions from significantly lower NOX

and SOX emissions will add to the

overall positive impact on airborne

particles. These reductions will be very

cost-effective compared to other

measures to reduce PM pollution.

Because direct PM emissions from

gasoline vehicles are related the

presence of sulfur in gasoline, no new

emission control devices, beyond what

manufacturers are expected to install to

meet the NOX and NMOG standards,

will be necessary to provide the

reductions expected for these pollutants

under the program. The standards will

provide valuable insurance against

increases in PM emissions from LDVs,

LDTs, and MDPVs.

Finally, the Tier 2/Gasoline Sulfur

program will significantly reduce CO

emissions from LDVs, LDTs, and

MDPVs. (See Chapter III of the RIA for

an analysis of these reductions.) The

technical changes needed to meet the

NMOG standards will also result in CO

reductions sufficient to meet the CO

standards. Thus, these CO reductions

will be very cost-effective since they

will not require any new emission

control devices beyond what

manufacturers are expected to install to

meet the NOX and NMOG standards.

We conclude, then, that today’s final

rule is a major source of ozone

precursor, PM, and CO emission

reductions when compared to other

available options. The discussions of

cost and cost effectiveness later in this

preamble and in the RIA explain the

derivation of cost effectiveness

estimates and compares them to the cost

effectiveness of other alternatives. That

discussion indicates that this program

will have a cost effectiveness

comparable to both the Tier 1 and NLEV

standards and will also be cost effective

when compared to non-mobile source

programs.

III. Air Quality Need For and Impact Of

Today’s Action

In the absence of significant new

controls on emission, tens of millions of

Americans would continue to be

exposed to unhealthy levels of air

pollution. Emissions from passenger

cars and light trucks are a significant

contributor to a number of air pollution

problems. Today’s action will

significantly reduce emissions from cars

and light trucks and hence will

significantly reduce the health risks

posed by air pollution. This section

summarizes the results of the analyses

we performed to arrive at our

determination that continuing air

quality problems are likely to exist, that

these air quality problems would be in

part due to emissions from cars and

light trucks, and that the new standards

promulgated by today’s final rule will

improve air quality and mitigate other

environmental problems.

A. Americans Face Serious Air Quality

Problems That Require Further Emission

Reductions

Air quality in the United States

continues to improve. Nationally, the

1997 air quality levels were the best on

record for all six criteria pollutants. 10 In

fact, the 1990s have shown a steady

trend of improvement, due to reductions

in emissions from most sources of air

pollution, from factories to motor

vehicles. Despite great progress in air

quality improvement, in 1997 there

were still approximately 107 million

people nationwide who lived in

counties with monitored air quality

levels above the primary national air

quality standards. 11 There are also

people living in counties outside of the

air monitoring network where violations

of the NAAQS could have also occurred

during the year. Moreover, unless there

are reductions in overall emissions

beyond those that are scheduled to be

achieved by already committed controls,

many of these Americans will continue

to be exposed to unhealthy air.

Ambient ozone is formed in the lower

atmosphere through a complex

interaction of VOC and NOX emissions.

Cars and light trucks emit a substantial

fraction of these emissions. Ambient PM

is emitted directly from cars and light

trucks; it also forms in the atmosphere

from NOX, sulfur oxides (SOX), and

VOC, all of which are emitted by motor

vehicles. When ozone exceeds the air

quality standards, otherwise healthy

people often have reduced lung function

and chest pain, and hospital admissions

for people with respiratory ailments like

asthma increase; for longer exposures,

permanent lung damage can occur.

Similarly, fine particles can penetrate

deep into the lungs. Results of studies

suggest a likely causal role of ambient

PM in contributing to reported effects,

such as: premature mortality, increased

hospital admissions, increased

respiratory symptoms, and changes in

lung tissue. When either ozone or PM

air quality problems are present, those

hardest hit tend to be children, the

elderly, and people who already have

health problems.

The health effects of high ozone and

PM levels are not the only reason for

concern about continuing air pollution.

Ozone and PM also harm plants and

damage materials. PM reduces visibility

and contributes to significant visibility

impairment in our national parks and

monuments and in many urban areas. In

addition, air pollution from motor

vehicles contributes to cancer and other

health risks, acidification of lakes and

streams, eutrophication of coastal and

inland waters, and elevated drinking

water nitrate levels. These problems

impose a substantial burden on public

health, our economy, and our

ecosystems.

In recognition of this burden,

Congress has passed and subsequently

amended the Clean Air Act. The Clean

Air Act requires each state to have an

approved State Implementation Plan

(SIP) that shows how an area plans to

meet its air quality obligations,

including achieving and then

maintaining attainment of all of the

National Ambient Air Quality Standards

(NAAQS), such as those for ozone and

PM. The Clean Air Act also requires

EPA to periodically re-evaluate the

NAAQS in light of new scientific

information. Our most recent reevaluation of the ozone and PM NAAQS

led us to revise both standards (62 FR

38856, July 18, 1997 and 62 FR 38652,

July 18, 1997). These revised standards

reflected additional information that

had become available since the previous

revision of the ozone and PM standards,

respectively.

On May 14, 1999, a panel of the

United States Court of Appeals for the

District of Columbia Circuit reviewed

EPA’s revisions to the ozone and PM

NAAQS and found, by a 2–1 vote, that

sections 108 and 109 of the Clean Air

Act, as interpreted by EPA, represent

unconstitutional delegations of

Congressional power. American

Trucking Ass’n., Inc. et al., v.

Environmental Protection Agency, 175

F.3d 1027 (D.C. Cir. 1999). Among other

things the Court remanded the record

6706 Federal Register / Vol. 65, No. 28 / Thursday, February 10, 2000 / Rules and Regulations

for the 8-hour ozone NAAQS and the

PM2.5 NAAQS to EPA. On October 29,

1999, EPA’s petition for rehearing by the

three judge panel was denied, with the

exception that the panel modified its

prior ruling regarding EPA’s authority to

implement a revised ozone NAAQS

under Part D subpart 2 of Title I. EPA’s

petition for rehearing en banc by the full

Circuit was also denied, although five of

the nine judges considering the petition

agreed to rehear the case.

As a result of the Court’s decision,

requirements on the States to implement

the new 8-hour ozone standard have

been suspended although the standard

itself is still in force and the science

behind it has generally not been

contradicted. The court also did not

question EPA’s findings regarding the

health effects of PM10 and PM2.5.

However, due to the uncertainty

regarding the status of the new NAAQS,

we will rely on the preexisting NAAQS

in determining air quality need under

section 202(i) of the Act.

Carbon monoxide (CO) can cause

serious health effects for those who

suffer from cardiovascular disease, such

as angina pectoris. There has been

considerable progress in attaining the

longstanding NAAQS for carbon

monoxide, largely through more

stringent standards for CO from motor

vehicles. This progress has been made

despite large increases in travel by

vehicle. In 1997, there were about 9

million people living in three counties

with CO concentrations above the level

of the CO NAAQS. In the recent past,

this figure has fluctuated up and down.

At the present time there are 15 counties

classified as serious CO nonattainment

areas, all with a recent history of

NAAQS violations. At this time,

prospects for these areas attaining by the

serious CO area attainment deadline of

December 31, 2000 are uncertain. While

violations of the NAAQS have not

occurred recently in most of the other

33 counties still classified as

nonattainment, even these must

demonstrate that they will remain safely

below the NAAQS for ten years despite

expected growth in vehicle travel and

other sources of CO emissions before

they can be reclassified to attainment.

Because of the large role of motor

vehicles in causing high ambient CO

concentrations, where there is reason to

be concerned about CO attainment and

maintenance, local areas look to

national emission standards for most of

the solution.

As discussed below, EPA has also

finalized regulations that regions and

states implement plans for protecting

and improving visibility in the 156

mandatory Federal Class I areas as

defined in Section 162(a) of the Clean

Air Act. These areas are primarily

national parks and wilderness areas.

To accomplish the goal of full

attainment in all areas according to the

schedules for the various NAAQS, and

to achieve the goals of the visibility

program, the federal government must

assist the states by reducing emissions

from sources that are not as practical to

control at the state level as at the federal

level. Vehicles and fuels move freely

among the states, and they are produced

by national or global scale industries.

Most individual states are not in a

position to regulate these industries

effectively and efficiently. The Clean

Air Act therefore gives EPA primary

authority to regulate emissions from the

various types of highway vehicles and

their fuels. Our actions to reduce

emissions from these and other national

sources are a crucial and essential

complement to actions by states to

reduce emissions from more localized

sources.

If we were not to adopt new standards

to reduce emissions from cars and light

trucks, emissions from these vehicles

would remain a large portion of the

emissions burden that causes elevated

ozone and continued nonattainment

with the ozone NAAQS, which in turn

would affect tens of millions of

Americans. Because the contribution of

cars and light trucks to both local

emissions and transported pollution

would be so great, and the expected

emission reduction shortfall in many

areas is so large, further reductions from

cars and light trucks will be an

important element of many attainment

strategies, especially for ozone in the

2007 to 2010 time frame. The

contribution of these vehicles to PM

exposure and PM nonattainment would

also remain significant, and would

increase considerably if diesel engines

are used in more cars or light trucks.

Furthermore, without new standards,

steady annual increases in fleet size and

miles of travel would outstrip the

benefits of current emission controls,

and would cause ozone-forming

emissions from cars and trucks to grow

each year starting about 2013.

The standards being promulgated by

today’s actions will reduce emissions of

ozone precursors and PM precursors

from cars and light trucks greatly.

However, even with this decrease, many

areas will likely still find it necessary to

obtain additional reductions from other

sources in order to fully attain the ozone

and PM NAAQS. Their task will be

easier and the economic impact on their

industries and citizens will be lighter as

a result of the standards promulgated by

today’s actions. Following

implementation of the Regional Ozone

Transport Rule, states will have already

adopted emission reduction

requirements for nearly all large sources

of VOC and NOX for which costeffective control technologies are

known. Those that remain in

nonattainment therefore will have to

consider their remaining alternatives.

Many of the state and local programs

states may consider as alternatives are

very costly, and the emissions impact

from each additional emissions source

subjected to new emissions controls

would be considerably smaller than the

emissions impact of the standards being

promulgated today. Therefore, the

emission reductions from these

standards for gasoline, cars, and light

trucks will ease the need for states to

find first-time reductions from the

mostly smaller sources that have not yet

been controlled, including area sources

that are closely connected with

individual and small business activities.

The emission reductions from the

standards being promulgated today will

also reduce the need for states to seek

even deeper reductions from large and

small sources already subject to

emission controls.

We project that today’s actions will

also have important benefits for carbon

monoxide, regional visibility, acid rain,

and coastal water quality.

For these and other reasons discussed

in this document, we have determined

that significant emission reductions will

still be needed by the middle of the next

decade and beyond to achieve and

maintain further improvements in air

quality in many, geographically

dispersed areas. We also believe that a

significant portion of these emission

reductions will be obtained by reducing

emissions from cars and light trucks as

a result of today’s actions. We believe

that such reductions are necessary

(since cars and light trucks are such

large contributors to current and

projected ozone problems) and

reasonable (since these reductions can

be achieved at a reasonable cost

compared to other alternative

reductions).

The remainder of this section

describes the health and environmental

problems that today’s actions will help

mitigate and the expected health and

environmental benefits of these actions.

Ozone is discussed first, followed by

PM, other criteria pollutants, visibility,

air toxics, and other environmental

impacts. The emission inventories and

air quality analyses are explained more

fully in the Regulatory Impact Analysis

for today’s actions.

Federal Register / Vol. 65, No. 28 / Thursday, February 10, 2000 / Rules and Regulations 6707

12Total column ozone, a large percentage of

which occurs in the stratosphere and a smaller

percentage of which occurs in the troposphere,

helps to provide a protective layer against

ultraviolet radiation.

B. Ozone

1. Background on Ozone Air Quality

Ground-level ozone is the main

harmful ingredient in smog.12 Ozone is

produced by complex chemical

reactions when its precursors, VOC and

NOX, react in the presence of sunlight.

Short-term (1–3 hours) and prolonged

(6–8 hours) exposures to ambient ozone

at levels common in many cities have

been linked to a number of health

effects of concerns. For example,

increased hospital admissions and

emergency room visits for respiratory

causes have been associated with

ambient ozone exposures at such levels.

Repeated exposures to ozone can make

people more susceptible to respiratory

infection, result in lung inflammation,

and aggravate pre-existing respiratory

diseases such as asthma. Other health

effects attributed to ozone exposures

include significant decreases in lung

function and increased respiratory

symptoms such as chest pain and

cough. These effects generally occur

while individuals are engaged in

moderate or heavy exertion.

Children active outdoors during the

summer when ozone levels are at their

highest are most at risk of experiencing

such effects. Other at-risk groups

include adults who are active outdoors

(e.g., outdoor workers), and individuals

with pre-existing respiratory disease

such as asthma and chronic obstructive

lung disease. In addition, longer-term

exposures to moderate levels of ozone

present the possibility of irreversible

changes in the lungs which could lead

to premature aging of the lungs and/or

chronic respiratory illnesses.

Ozone also affects vegetation and

ecosystems, leading to reductions in

agricultural and commercial forest

yields, reduced growth and survivability

of tree seedlings, and increased plant

susceptibility to disease, pests, and

other environmental stresses (e.g., harsh

weather). In long-lived species, these

effects may become evident only after

several years or even decades, thus

having the potential for long-term

effects on forest ecosystems. Groundlevel ozone damage to the foliage of

trees and other plants also can decrease

the aesthetic value of ornamental

species as well as the natural beauty of

our national parks and recreation areas.

Many areas which were classified as

nonattainment when classifications

were made under the 1990 Clean Air

Act Amendments have not experienced

violations more recently. However, 50

metropolitan areas had ozone design

values above the NAAQS in either or

both of the 1995–1997 and the 1996–

1998 monitoring periods. In many urban

areas, the downward trend in ozone that

prevailed earlier has become less strong

or stopped in the last few years, even

when adjustments are made for

meteorological conditions. We believe

that one factor that has worked against

ozone improvement in the last few years

has been the growing use of light trucks

with higher emissions than the cars

used formerly. The predictions of future

ozone concentrations used in

developing today’s action take account

of this growing use of light trucks.

2. Additional Emission Reductions Are

Needed To Attain and Maintain the

Ozone NAAQS

a. Summary

We have determined that additional

emission reductions are needed to attain

and maintain the 1-hour ozone NAAQS.

This overall conclusion is based on our

prediction that 26 metropolitan areas

are each certain or highly likely to need

additional reductions, and that an

additional 12 areas each have a

moderate to significant probability of

needing them.

To determine whether additional

reductions are needed in order to attain

and maintain the ozone NAAQS, we

used ozone modeling to predict what

areas would not attain the NAAQS in

the future. We accounted for the

emission reductions that have already

been achieved, those that will be

achieved in the future by actions

already underway, and increases in

emissions expected from increased use

of sources of pollution.

In our May 13, 1999 proposal, we

presented information from

photochemical modeling we performed

to predict what areas would meet the

ozone NAAQS in 2007. The year 2007

falls after the expected date of most

emission reductions which states are

required to achieve or have otherwise

committed to achieve, and near the

attainment deadline for many ozone

nonattainment areas. We presented

additional information from the same

photochemical modeling work in two

supplemental notices, on June 30, 1999

(to better explain the basis for our

proposal in light of the Court’s ruling on

the 8-hour ozone NAAQS), and October

25, 1999 (to explain the implications for

our Tier 2/Gasoline Sulfur proposal

from our more recent proposal, which

we expect to make final shortly, to reinstate the 1-hour ozone NAAQS in

many areas). In Response to Comments

on these Federal Register notices, we

made revisions to our own ozone

modeling. We also obtained ozone

modeling results from a number of state

air planning agencies and from members

of the automobile manufacturing

industry. We have considered all of this

information as part of our determination

that the regulations promulgated in this

rule are needed and appropriate.

Based on the available ozone

modeling and other information, we

project that there are 26 metropolitan

areas which will be unable to attain and

maintain the NAAQS, in the absence of

additional reductions. These areas had a

combined population of over 86 million

in 1996, and are distributed across most

regions of the U.S. We have concluded

that each is certain or very likely to

require additional reductions to attain

the NAAQS. Taken together and

considering their number, size, and

geographic distribution, these areas

establish the case that additional

reductions are needed in order to attain

and maintain the 1-hour standard.

In addition, our analysis suggests

there will be other areas that will have

problems attaining and maintaining

compliance with the one-hour ozone

standard in the future. There are 12

additional metropolitan areas with a

total 1996 population of over 25 million

people in this category. EPA’s ozone

modeling for 2007 predicts exceedances

for each of these areas. However, for six

of them local recent monitoring

information is not indicating

nonattainment. Given how close to

nonattainment these areas are, EPA

believes it is likely that at least a

significant subset of this group of areas

will face compliance problems by 2007

or beyond if additional actions to lower

air emissions are not taken. This belief

is based on historical experience with

areas that will undergo economic and

population growth over time and that

are in larger regions that are also

experiencing growth. The other six areas

in this group are nonattainment now,

and local modeling shows them

reaching attainment by 2005 or 2007.

Modeling uncertainties and growth

beyond the attainment date make it

likely that at least some of these areas

will also face compliance problems if

additional actions to lower air emissions

are not taken. This situation further

supports our determination that

additional reductions in mobile source

emissions are needed for attainment and

maintenance.

We would like to emphasize that the

advantages of the Tier 2/Gasoline Sulfur

program will be enjoyed by the whole

country. There are important advantages

for approximately 30 more metropolitan

6708 Federal Register / Vol. 65, No. 28 / Thursday, February 10, 2000 / Rules and Regulations

13As measured by ozone design value.

14While the use of these emissions estimates was

new to our baseline ozone modeling in the latest

ozone modeling, they were not new to this

rulemaking, having already been used in

calculations of cost-effectiveness in the draft RIA.

We therefore were able to consider public

comments on these estimates prior to using them

in the latest ozone modeling

areas, with close to 30 million people

residing in them, whose ozone levels are

now within 10 percent of violating the

1-hour NAAQS.13 Most of these areas

have been in nonattainment in the past.

We believe the emission reductions

from the Tier 2/Gasoline Sulfur program

are an important component of an

overall EPA-state approach to enable

these areas to continue to maintain

clean air given expected growth. EPA

believes that the long term ability of the

states to continue to meet the NAAQS

is extremely important. In the future,

EPA will be considering additional

approaches for assisting in maintenance

of the NAAQS. Also, we believe that the

Tier 2/Gasoline Sulfur program has

important benefits for other

nonattainment areas which our

modeling and local modeling show to be

on a path to come into attainment in the

next eight years. For these areas, the

extra emission reductions from the

program will take some of the

uncertainty out of their plan to attain

the standard and give them a head start

on developing their plan to stay in

attainment.

In every area of the country, the new

standards will give transportation

planning bodies and industrial

development leaders more options

within the area’s overall emissions

constraints. This will allow local and

state officials to better accommodate

local needs and growth opportunities.

With these new standards for vehicles

and gasoline, unusually adverse weather

or strong local economic growth will be

less likely to cause ozone levels high

enough to trigger the planning

requirements of the Clean Air Act. In

addition, by reducing emissions and

ozone levels across the nation as a

whole, there will be less transport of

ozone between areas, reducing the

amount of ozone entering downwind

areas. This will give the downwind

areas a better opportunity to maintain

and attain the NAAQS through local

efforts.

All of our determinations presented

here about the need for the Tier 2/

Gasoline Sulfur program take into

account the prior NOX reductions we

expect from the Regional Ozone

Transport Rule. This rule is now in

litigation. If the outcome of that

litigation reduces the NOX reductions

that will be achieved, the need for the

Tier 2/Gasoline Sulfur program will be

even greater.

b. Ozone Modeling Presented in Our

Proposal and Supplemental Notices

The ozone modeling we presented in

our proposal and the two supplemental

notices was originally conducted as part

of our development of the Regional

Ozone Transport Rule. The ‘‘revised

budget’’ emission control scenario we

modeled for the Regional Ozone

Transport Rule contained the right set of

existing and committed emission

controls for it to serve as the starting

point for making our determination on

the need for additional emission

reductions. We added a new ‘‘control

case’’ to represent the effects of our

proposed vehicle and gasoline

standards.

This ozone modeling provided

predictions of ozone concentrations in

2007 across the eastern U.S., under

certain meteorological conditions.

Predictions of attainment or

nonattainment are based on these

predicted ozone concentrations. Two

approaches to making attainment

predictions have been used or

advocated in the past: a rollback

approach and an exceedance approach.

In the NPRM of May 13, 1999, we

presented predictions of attainment and

nonattainment using a rollback

approach. For the 1-hour standard, we

reported that 8 metropolitan areas and

two rural counties were predicted to be

in nonattainment in 2007 under the

rollback method. In the first

supplemental notice of June 30, 1999 we

presented a prediction that 17 areas

would be nonattainment based on the

exceedance method, and invited

comment on all aspects of the modeling

and its interpretation. Our second and

last notice on October 27, 1999,

presented predictions of violations

using the exceedance method for

additional areas which we had

previously excluded because the 1-hour

standard did not apply to them. This

was in anticipation of the reinstatement

of the 1-hour standard to these areas,

which we proposed on October 25, 1999

and expect to complete very soon. 64 FR

57524. We also announced that we were

conducting another round of modeling,

described below. See the Response to

Comments document for more

discussion of the rollback and

exceedance approaches.

c. Updated and Additional Ozone

Modeling

We have updated and expanded our

ozone modeling. We updated the ozone

modeling so that it is now based on

estimates of vehicle emissions that

reflect the most recent data and our best

understanding of several aspects of

emissions estimation.14 We also

changed most of the episodes for which

we modeled ozone concentrations, with

all of our final episode days coming

from a single calendar year. By selecting

days from within a single year, we

responded to a comment that the

original episode periods might together

contain an atypically high number of

days favorable to ozone formation for

some parts of the country. The new

episodes are also better at representing

conditions that lead to high ozone in

areas along the Gulf Coast, whose

ozone-forming conditions were not well

represented in the episodes used for the

original modeling.

While we considered these

improvements necessary and

appropriate in light of comments and

other information available to us, the

actual results of the two rounds of

modeling with regard to the need for

additional reductions have turned out to

be similar. The latest round of modeling

provided us ozone predictions for 2007

and 2030 in the eastern U.S., and for

2030 in the western U.S. There are some

differences in specific results, where

and when the two models can be

directly compared. However, the same

conclusion would be reached from

either, namely that there is a broad set

of areas with predicted ozone

concentrations in 2007 above 0.124

ppm, in the baseline scenario without

additional emission reductions.

We have compared and supplemented

our own ozone modeling with other

modeling studies, either submitted to us

as comments to this rulemaking, as state

implementation plan (SIP) revisions, or

brought to our attention through our

consultations with states on SIP

revisions that are in development. The

ozone modeling in the SIP revisions has

the advantage of using emission

inventories that are more specific to the

area being modeled, and of using

meteorological conditions selected

specifically for each area. Also, the SIP

revisions included other evidence and

analysis, such as analysis of air quality

and emissions trends, observation based

models that make use of data on

concentrations of ozone precursors,

alternative rollback analyses, and

information on the responsiveness of

the air quality model. For some areas,

we decided that the predictions of

attainment or nonattainment from our

Federal Register / Vol. 65, No. 28 / Thursday, February 10, 2000 / Rules and Regulations 6709

15EPA’s modeling presumed that cars and light

trucks will continue to meet the emission levels of

the National Low Emissions Vehicle (NLEV)

program after model year 2003, even though the

program will end in model year 2003 or shortly

thereafter. Had our modeling not included such

levels in its inventory assumptions, trends for

ozone concentrations would have shown earlier

increases in ozone concentrations.

16The date of the predicted violation was 2007

for most areas, 2010 in the case of Los Angeles, CA,

and 2030 in the case of Portland-Salem, OR.

17With regard to eventual final action on the 1-

hour attainment demonstration for Washington, DC,

the issue of the continuation of the NLEV standards

is mooted by the promulgation of the Tier 2/

Gasoline Sulfur program. A portion of the emission

reductions from this program will replace the post2003 model year NLEV reductions assumed in the

SIP.

modeling were less reliable than

conclusions that could be drawn from

this additional evidence and analysis.

For example, in some areas our episodes

did not capture the meteorological

conditions that have caused high ozone,

while local modeling did so.

d. Results and Conclusions

As discussed in detail below, it is

clear that the NOX and VOC reductions

to be achieved through the Tier 2/

Gasoline Sulfur program are needed to

attain and maintain compliance with

the 1 hour ozone NAAQS. Although the

general pattern observed in our

modeling indicates improvements in the

near term, growth in overall emissions

will lead to worsening of air quality

over the long term.

Based on our ozone modeling, we

have analyzed ozone predictions for 52

metropolitan areas for 1996, 2007, and

2030. In addition, we reviewed ozone

attainment modeling and other evidence

covering 15 of these areas, from SIP

submittals or from modeling underway

to support SIP revisions. This local

modeling addressed only the current or

requested attainment date in each area.

We then made attainment and

nonattainment predictions from this

information.

The general pattern we observed with

the baseline scenario, i.e., without new

emission reductions, is a broad

reduction between 1996 and 2007 in the

geographic extent of ozone

concentrations above the NAAQS, and

in the frequency and severity of

exceedances. This is consistent with the

national emissions inventory trend

between these two years. At the same

time, we also found that peak ozone

concentrations and the frequency of

exceedances in 2030 were generally

somewhat higher than in 2007 for most

areas analyzed. This too is consistent

with our analysis of emission inventory

trends, which shows that the total NOX

inventory from all sources will decline

from 2007 to about 2015 and then begin

to increase due to growth in the activity

of emission sources. In 2030, our

analysis predicts that NOX emissions

from all sources will be about one

percent higher than in 2007. While we

did not model ozone concentrations for

years between 2007 and 2030, we expect

that they would track the national

emissions trend by showing a period of

improvement after 2007 and then

deterioration, although individual areas

will vary due to local source mix and

growth rates.15

Within this general pattern of ozone

attainment changes between 1996 and

2030, we have determined that 26

metropolitan areas are certain or highly

likely to need additional reductions to

attain and maintain the 1-hour ozone

NAAQS. These 26 areas are those that

have current violations of the 1-hour

ozone NAAQS and are predicted by the

best ozone modeling we have available

to still be in violation without a new

federal vehicle program in 2007.16

Based on the general trends described

above, without further emissions

reductions many of these areas may also

have violations continuously

throughout the period from 2007 to

2030, while others may briefly attain

and then return to nonattainment on or

before 2030. These 26 metropolitan

areas are listed in Table III.B–1, along

with their 1996 population which totals

over 86 million. The sizes of these areas

and their geographical distribution

strongly support an overall need for

additional reductions in order to attain

and maintain under section 202(i).

Because ozone concentration patterns

causing violations of the 1-hour NAAQS

are well established to endanger public

health or welfare, this determination

also supports our actions today under

the general authority of sections

202(a)(1), 202(a)(3), and 202(b).

As indicated above, in reaching this

conclusion about these 26 areas, we

examined local ozone modeling in SIP

submittals. These local analyses are

considered to be more extensive than

our own modeling for estimating

whether there would be NAAQS

nonattainment without further emission

reductions, when interpreted by a

weight of evidence method which meets

our guidance for such modeling. One of

the areas which submitted a SIP

revision was a special case. We have

recently proposed to approve the 1-hour

ozone attainment demonstration for the

nonattainment area of Washington, D.C.

(but not Baltimore). We have

nevertheless included this area on the

list of 26 that are certain or highly likely

to require further reductions to attain

and maintain, because its SIP

attainment demonstration assumed

emission reductions from vehicles

meeting the National Low Emissions

Vehicle (NLEV) standards.

However, by its own terms, the NLEV

standards would not extend beyond the

2003 model year if we did not

promulgate Tier 2 vehicle standards at

least as stringent as the NLEV standards.

See 40 CFR 86.1701–99(c). Thus, the

emission reductions relied upon from

2004 and later model year NLEV

vehicles are themselves ‘‘further

reductions’’ for the purposes of CAA

section 202(i).17 The local modeling

indicating attainment with these

reductions is therefore strong evidence

that further reductions are needed past

2003, beyond those provided by the Tier

1 program. Based on this, and on the

fact that our own ozone modeling

showed the Washington, DC area to

violate the NAAQS in 2007 even with

full NLEV emission reductions, we have

concluded that it should be included

with areas that do require further

reductions to attain and maintain the 1-

hour ozone NAAQS.

The 1-hour ozone NAAQS presently

does not apply in 12 of the 26 areas

listed in Table III.B–1, but we have

proposed to re-instate it and expect to

complete that action shortly. These

areas are indicated in the table. Our

decision to include these areas on this

list is based on the contingency that we

will re-instate the 1-hour standard in

these areas. However, even if we

considered only the 14 areas where the

1-hour standard applies as of the

signature date of this notice, we have

concluded that our determination

would be the same.

TABLE III.B–1.—TWENTY-SIX METROPOLITAN AREAS WHICH ARE CERTAIN OR HIGHLY LIKELY TO REQUIRE

ADDITIONAL EMISSION REDUCTIONS

IN ORDER TO ATTAIN AND MAINTAIN

THE 1-HOUR OZONE NAAQS

Metropolitan area

1996

Population

(millions)

Atlanta, GA MSA ...................... 3.5

Barnstable-Yarmouth, MA

MSAa .................................... 0.2

Baton Rouge, LA MSA ............. 0.6

Beaumont-Port Arthur, TX MSA 0.4

Birmingham, AL MSA ............... 0.9

Boston-Worcester-Lawrence,

MA–NH–ME–CT CMSAa ...... 5.6

Charlotte-Gastonia-Rock Hill,

NC–SC MSAa ....................... 1.3

6710 Federal Register / Vol. 65, No. 28 / Thursday, February 10, 2000 / Rules and Regulations

18The SIP revisions for Chicago and Milwaukee

demonstrated that these two areas as well as Benton

Harbor and Grand Rapids areas in Michigan (which

are maintenance areas but have experienced ozone

NAAQS violations recently) would not experience

NAAQS violations in 2007, with a strategy that

relied only on Tier 1 vehicle emission standards.

We have also recently proposed to approve the 1-

hour attainment demonstration for Greater

Connecticut, covering the Hartford and New

London areas, which assumed full NLEV emission

reductions. However, Connecticut is committed in

its SIP to adopt California vehicle standards if

NLEV does end with the 2003 model year if a more

stringent federal program is not promulgated. The

California standards are more stringent than NLEV.

The case of one additional area whose attainment

demonstration we recently proposed to approve,

Western Massachusetts (Springfield), should be

explained here to avoid possible confusion. Our

own ozone modeling predicted that Springfield

would attain the NAAQS in 2007. Massachusetts

has adopted the California vehicle emission

standards, so there is no issue of the continuation

of the NLEV standards.

TABLE III.B–1.—TWENTY-SIX METROPOLITAN AREAS WHICH ARE CERTAIN OR HIGHLY LIKELY TO REQUIRE

ADDITIONAL EMISSION REDUCTIONS

IN ORDER TO ATTAIN AND MAINTAIN

THE 1-HOUR OZONE NAAQS—Continued

Metropolitan area

1996

Population

(millions)

Cincinnati-Hamilton, OH–KY–IN

CMSA .................................... 1.9

Dallas-Fort Worth, TX CMSA ... 4.6

Houma, LA MSAa .................... 0.2

Houston-Galveston-Brazoria,

TX CMSA .............................. 4.3

Huntington-Ashland, WV–KY–

OH MSAa .............................. 0.3

Indianapolis, IN MSAa .............. 1.5

Los Angeles-Riverside-San

Bernardino CA CMSA ........... 15.5

Louisville, KY–IN MSA ............. 1.0

Macon, GA MSAa .................... 0.3

Memphis, TN–AR–MS MSAa ... 1.1

Nashville, TN MSAa ................. 1.1

New York-Northern New Jersey-Long Island, NY–NJ–

CT–PA CMSA ....................... 19.9

Philadelphia-Wilmington-Atlantic City, PA–NJ–DE–MD

CMSA .................................... 6.0

Pittsburgh, PA MSA .................. 2.4

Portland-Salem, OR–WA

CMSAa .................................. 2.1

Providence-Fall River-Warwick,

RI–MA MSAa ........................ 1.1

Richmond-Petersburg, VA

MSAa .................................... 0.9

St. Louis, MO–IL MSA .............. 2.5

Washington-Baltimore, DC–

MD–VA–WV CMSA .............. 7.2

Total Population ............. 86.3

Notes:

aThe 1-hour ozone NAAQS does not currently apply, but we have proposed and expect to re-instate it shortly.

There are 12 additional metropolitan

areas, with another 25.3 million people

in 1996, for which the available ozone

modeling suggests significant risk of

failing to attain and maintain the 1-hour

ozone NAAQS without additional

emission reductions. Table III.B–2 lists

the areas we put in this second category.

Our own ozone modeling predicted

these 12 areas to need further reductions

to avoid violations in 2007. For six of

these areas, recent air quality

monitoring data indicate violation, but

we have reviewed local ozone modeling

and other evidence indicating

attainment in 2007.18 Based on this

evidence, we have kept these areas

separate from the previous set of 26

areas which we consider certain or

highly likely to need additional

reductions. However, we still consider

there to be a significant risk of failure to

attain and maintain in these six areas

because this local modeling has

inherent uncertainties, as all ozone

modeling does. Moreover, the local

modeling did not examine the period

after initial attainment.

For the other six of the 12 areas, the

air quality monitoring data shows

current attainment but with less than a

10 percent margin below the NAAQS.

This suggests these areas may remain

without violations for some time, but we

believe there is still a moderate risk of

future violation of the NAAQS because

meteorological conditions may be more

severe in the future.

It is highly likely that at least some of

these 12 areas will violate the NAAQS

without additional reductions, and it is

a distinct possibility that many of them

will do so. We consider the situation in

these areas to support our determination

that, overall, additional reductions are

needed for attainment and maintenance.

However, we reiterate that our

predictions for the 26 areas listed in

Table III.B–1, and even our predictions

for only the 14 of those 26 for which the

1-hour standard now applies, are a

sufficient basis for our determination of

an overall need for additional

reductions and for our actions today.

TABLE III.B–2.—TWELVE METROPOLITAN AREAS WITH MODERATE TO

SIGNIFICANT RISK OF FAILING TO

ATTAIN AND MAINTAIN THE 1-HOUR

OZONE NAAQS WITHOUT ADDITIONAL EMISSION REDUCTIONS

Metropolitan area

1996

Population

(millions)

Benton Harbor, MI MSAa ......... 0.2

Biloxi-Gulfport-Pascagoula, MS

MSAa .................................... 0.3

TABLE III.B–2.—TWELVE METROPOLITAN AREAS WITH MODERATE TO

SIGNIFICANT RISK OF FAILING TO

ATTAIN AND MAINTAIN THE 1-HOUR

OZONE NAAQS WITHOUT ADDITIONAL EMISSION REDUCTIONS—

Continued

Metropolitan area

1996

Population

(millions)

Chicago-Gary-Kenosha, IL–IN–

WI CMSA .............................. 8.6

Cleveland-Akron, OH CMSAa .. 2.9

Detroit-Ann Arbor-Flint, MI

CMSAa .................................. 5.3

Grand Rapids-Muskegon-Holland, MI MSAa ...................... 1.0

Hartford, CT MSA ..................... 1.1

Milwaukee-Racine, WI CMSA .. 1.6

New London-Norwich, CT–RI

MSAa .................................... 1.3

New Orleans, LA MSAa ........... 0.3

Pensacola, FL MSAa ............... 0.4

Tampa, FL MSAa ..................... 2.2

Total Population ............. 25.3

Notes:

aThe 1-hour ozone NAAQS does not currently apply, but we have proposed and expect to re-instate it shortly.

e. Issues and Comments Addressed

We received detailed comments from

the automobile industry related to ozone

modeling and the need for additional

emission reductions in order to attain

and maintain. These were of three types.

Accuracy of modeling ozone

concentrations.—The automobile

industry commenters pointed out that in

the modeling presented with our

proposal, the ozone model and

exceedance predicted violations of the

NAAQS in 1995 in areas where

monitoring data indicated no violations.

They cited these cases as examples of

model inaccuracy. We have made

improvements to our emissions

estimates, our episodes, and other

aspects of the modeling system. These

changes have improved the accuracy of

the predicted ozone concentrations.

Also, as stated above, our list of 26 areas

that support our finding that additional

reductions are needed does not include

any areas where recent monitoring data

shows no violations. The final RIA

addresses issues of model accuracy in

more depth.

As explained in the final RIA, our

very latest estimates of car and light

truck emissions without the benefits of

our new standards are actually

somewhat higher than the estimates

used in the final round of ozone

modeling, because the most recent data

indicate even more serious adverse

emissions effects from sulfur in

Federal Register / Vol. 65, No. 28 / Thursday, February 10, 2000 / Rules and Regulations 6711

19We did not include the Los Angeles-RiversideSan Bernardino area in this analysis, since it was

not covered by our 2007 modeling, but we do

believe it is rightly part of the basis for a

determination on the need for additional

reductions.

20As explained in the final RIA, our very lastest

estimates of car and light truck emissions without

the benefits of our new standards are actually

somewhat higher than the estimates used in the

final round of ozone modeling, because more recent

data indicate even more serious adverse emissions

effects from sulfur in gasoline. Thus, we think our

predictions of ozone nonattainment may be

conservative.

gasoline. Thus, we think our predictions

of ozone nonattainment using emission

estimates prepared before this most

recent data on sulfur was considered,

may be conservative. This topic is

discussed in more detail in section

III.B.3.

Prediction of attainment/

nonattainment.—For most areas, we

predicted 2007 or 2030 attainment or

nonattainment based on the exceedance

method. The exceedance method

predicts an area to be in attainment only

if there are no predicted exceedances of

the NAAQS during any episode day.

However, for the areas for which we

have received 1-hour attainment

demonstrations in SIP revisions, our

predictions were based on a larger and

more robust set of data. When a state’s

modeling shows an exceedance that

would otherwise indicate

nonattainment, we allow the state to

submit a variety of other evidence and

analysis, such as locality specific

meteorological conditions, analysis of

air quality and emissions trends,

observational based models that make

use of data on concentrations of ozone

precursors, a rollback analysis, and

information on the responsiveness of

the air quality model. We then make a

weight-of-evidence determination of

attainment or nonattainment based on

consideration of all this local evidence.

We did this in forming the set of 26

areas we consider certain or highly

likely to need additional reductions to

attain or maintain, in some cases

concluding that attainment was

demonstrated and in others that it was

not.

The auto industry commenters

recommended the use of rollback as the

single method for making attainment

and nonattainment predictions from

predicted ozone concentrations. They

stated that the rollback method would

be more consistent than the exceedance

method with the NAAQS’s allowance of

three exceedances in a three year

period. They also believed that the

rollback method would compensate for

what they considered to be model over

predictions of ozone concentrations. We

believe that the rollback method is not

appropriate for use as the sole, or even

a primary, test of 1-hour ozone

attainment or nonattainment. A rollback

analysis may overlook violations that

occur away from ozone monitors, and it

may inappropriately project the effect of

a recent period of favorable weather into

the prediction of future attainment. In

determining the attainment and

maintenance prospects of numerous

areas, as here, it is not possible to

assemble and consider the full set of

local evidence that should accompany

any consideration of a rollback analysis.

In such a situation, we believe that the

exceedance method is the appropriate

choice. A fuller explanation of our

reasons for considering the exceedance

method more appropriate than rollback

is given in our Response to Comments

document.

We have not completely excluded the

rollback approach from the

determinations in this rulemaking. We

have considered it for those areas for

which we had enough information to

allow us to consider it in its proper

context, i.e., for those areas covered by

recent 1-hour SIP submissions. Of these

areas, we concluded that some will not

attain without additional reductions and

some will.

While we disagree with the use of the

rollback method, we have conducted a

hypothetical analysis of 2007 attainment

in all areas based only on our own

ozone modeling, applying the rollback

method recommended by the

commenters. We calculated in this

analysis that 15 metropolitan areas and

three other counties with nearly 56

million in population in 1996 would

violate the NAAQS in 2007. Moreover,

these 15 metro areas are geographically

spread out 19. We believe that this result

using the rollback method does not fully

capture the likely nonattainment that

would exist in 2007 in the absence of

additional emission reductions.

However, even if we were to consider

the use of rollback valid, we consider

this set of areas to also be an adequate

basis for making the same

determinations we have made based on

the more appropriate exceedance-based

analysis. The details of our hypothetical

analysis using the rollback method are

given in the final RIA and the technical

support document for our ozone

modeling analyses.

Ozone modeling and predictions.—

Members of the automobile

manufacturing industry submitted two

modeling studies: (1) a repetition of our

first round of modeling of the 37-state

eastern U.S. domain but with their

recommendations regarding estimates of

motor vehicle emissions in 2007 and

with the rollback method used to

predict 2007 nonattainment, and (2)

finer grid modeling for three smaller

domains, also with their recommended

estimates of emissions and with

nonattainment predicted using a

rollback method. Both modeling efforts

showed less widespread nonattainment

than we have determined and described

here. Taken together, these studies

predicted 2007 violations by the

rollback method in or downwind of

New York City, Chicago, Milwaukee,

western Michigan, Baton-Rouge, and

Houston.

The main difference between the

automobile industry’s ozone modeling

and ours is in the emission estimates.

We have reviewed the emissions

estimates used in the industry studies.

We concluded that the industry’s

emissions estimates employ

inappropriate analytical steps in the

calculation. Among the problems are

that the adjustments for the benefits of

inspection and maintenance programs

were not consistent with the base

estimate of in-use emissions, and the

sales trend towards light trucks and

SUVs was not properly captured. Also,

as stated, we disagree with the use of

the rollback approach as the sole test of

attainment. As a consequence, we

conclude that the industry’s ozone

modeling is not an appropriate basis for

making predictions of future attainment

or nonattainment. The final RIA

explains in detail how we have

addressed these and other emissions

modeling issues in a manner which is

more technically consistent and

correct,20 and how we have considered

the results from rollback analyses but

only as part of broad weight-of-evidence

determinations for areas for which this

was possible at this time. Our point-bypoint review is given in our Response to

Comments document.

The material on ozone modeling

submitted by the commenters, having

been prepared by the rollback method,

was difficult to re-interpret according to

our preferred exceedance method.

However, it appears that if this

modeling were interpreted by the

exceedance method, it would indicate

2007 nonattainment in Baltimore and

Washington, D.C. in addition to New

York City, Chicago, Milwaukee, western

Michigan, Baton-Rouge, and Houston.

Overall, we conclude that the material

submitted by the automobile industry

does not contradict the facts we have

used to make our determinations or the

actions we are taking today.

f. 8-Hour Ozone

The predictions of ozone

concentrations from the ozone modeling

6712 Federal Register / Vol. 65, No. 28 / Thursday, February 10, 2000 / Rules and Regulations

21Emission Trend Report, 1997.

22The auto manufacturer and northeastern state

commitments to the NLEV program are scheduled

to end in 2004 without further EPA action on Tier

2 standards, although continued voluntary

compliance by automobile manufacturers and the

affected states is a possibility. Our analysis of

emission trends and the emission benefits expected

from today’s action assumes for the base scenario

a continuation of the NLEV program past 2004. If

the NLEV program does not continue beyond 2004,

the reductions resulting from Tier 2 would be larger

than what is shown here. It also includes all other

control measures assumed to be implemented in

local areas, such as reformulated gasoline in all

required and opt-in areas and enhanced I/M where

required.

23Also, if the NLEV program ends in model year

2004 or shortly thereafter, as scheduled, this trend

would reverse more quickly in all areas.

can be used to make predictions of

attainment or nonattainment with the 8-

hour ozone NAAQS. In our draft RIA,

we estimated that 28 metropolitan areas

and 4 rural counties with a combined

population of 80 million people would

violate the 8-hour ozone NAAQS in

2007 without additional emission

reductions. Commenters noted

differences between exact rollback

procedure we had used in this

projection and the steps specified in

recent draft guidance we have issued on

8-hour ozone modeling. We agree with

the commenters that the steps specified

in our guidance are the correct ones to

use. However, since we are not basing

our promulgation of the Tier 2/Gasoline

Sulfur Program on the 8-hour ozone

NAAQS, we have not made any new

predictions of 8-hour ozone

nonattainment areas in 2007. Based on

our findings in previous analyses of this

sort, however, we believe that in the

absence of the Tier 2/Gasoline Sulfur

program there would be 8-hour

nonattainment areas that are not also

areas which we have concluded are

certain or highly likely to violate the 1-

hour NAAQS. If we considered it

appropriate to proceed with

implementation of the 8-hour standard,

these areas would support our

determination on the need for emission

reductions, and the appropriateness and

necessity of the vehicle and gasoline

standards we are establishing.

3. Cars and Light-duty Trucks Are a Big

Part of the NOX and VOC Emissions,

and Today’s Action Will Reduce This

Contribution Substantially

Emissions of VOCs and NOX come

from a variety of sources, both natural

and man-made. Natural sources,

including emissions that have been

traced to vegetation, account for a

substantial portion of total VOC

emissions in rural areas. The remainder

of this section focuses on the

contribution of motor vehicles to

emissions from human sources. Manmade VOCs are released as byproducts

of incomplete combustion as well as

evaporation of solvents and fuels. For

gasoline-fueled cars and light trucks,

approximately half of the VOC

emissions come from the vehicle

exhaust and half come from the

evaporation of gasoline from the fuel

system. NOX emissions are dominated

by man-made sources, most notably

high-temperature combustion processes

such as those occurring in automobiles

and power plants. Emissions from cars

and light trucks are currently, and will

remain, a major part of nationwide VOC

and NOX emissions. In 1996, cars and

light trucks comprised 25 percent of the

VOC emissions and 21 percent of the

NOX emissions from human sources in

the U.S.21 The contribution in

metropolitan areas was generally larger.

We have made significant

improvements in the analysis used to

estimate the emission inventory impacts

of this action, including improving the

emission factor modeling, using more

detailed local modeling input, and using

a more conservative (lower) estimate of

VMT growth. These changes are

detailed in the Regulatory Impact

Analysis for this rule. The following

discussion is based on this improved

analysis.

In addition to the improvements

which are incorporated in this analysis,

we also made further improvements in

the emission factor modeling after

analyzing comments which we did not

have time to incorporate into the

detailed inventory analysis described

here. The most notable change is related

to data which indicates that NOX and

NMOG emissions are even more

sensitive to gasoline sulfur than

previously thought. This change and

others are described in detail in the

Response to Comments. Our early

analysis of these changes indicates that

incorporating them into this analysis

would provide further support for this

action because these changes result in

both increases in the baseline emissions

without Tier 2 and in the reductions

that would result from Tier 2. For

example, in the detailed inventory

analysis we report below, we project

nationwide Tier 2/Gasoline Sulfur

control NOX reductions from cars and

light trucks of 856,471 tons per year in

2007. Using the version of the emission

factor model that incorporates these

additional changes increases the

estimated Tier 2 reductions to

approximately 1.0 million tons per year

in 2007 (estimated baseline emissions

without Tier 2 increase from 3.1 million

tons per year in 2007 to approximately

3.7 million tons per year using the

version of the emission factor model

that incorporates these additional

changes). Therefore, the estimates of the

inventory reductions given here (and

used as the basis for the ozone air

quality analysis) are clearly

conservative.

Motor vehicle emission controls have

led to significant improvements in

emissions released to the air (the

‘‘emission inventory’’) and will

continue to do so in the near term 22. In

the current analysis, we continue to find

that total emissions from the car and

light truck fleet would continue to

decline for a period, even if we were not

establishing the Tier 2/Gasoline Sulfur

program. This decline would result from

the introduction of cleaner reformulated

gasoline in 2000, the introduction of

National Low Emission Vehicles

(NLEVs) and vehicles complying with

the Enhanced Evaporative Test

Procedure and Supplemental Federal

Test Procedures, and the continuing

removal of older, higher-emitting

vehicles from the in-use vehicle fleet.

On a per mile basis, VOC and NOX

emissions from cars and light trucks

combined would have continued to

decline well beyond 2015, reflecting the

continuing effect of fleet turnover under

existing emission control programs.

However, projected increases in vehicle

miles traveled (VMT) will cause total

emissions from these vehicles to

increase. With this increase in travel

and without additional controls, we

project that combined NOX and VOC

emissions for cars and light trucks

without the Tier 2/Gasoline Sulfur

program would increase starting in 2013

and 2016, respectively, so that by 2030

they would return to levels above or

nearly the same as they will be in 2000.

In cities experiencing rapid growth,

such as Charlotte, North Carolina, the

near-term trend towards lower

emissions tends to reverse sooner.23

With additional improvements in the

modeling done in Response to

Comments, we now estimate that

without the Tier 2/Gasoline Sulfur

program, there will be a constant

increase in these emission over time.

Figure III–1 illustrates this expected

trend in car and light truck NOX

emissions in the absence of today’s

action. The figure also allows the

contribution of cars to be distinguished

from that of light trucks. The figure

clearly shows the impact of steady

growth in light truck sales and travel on

overall light-duty NOX emissions; the

decrease in overall light-duty emission

levels is due solely to reductions in LDV

emissions. In 2000, we project that

Federal Register / Vol. 65, No. 28 / Thursday, February 10, 2000 / Rules and Regulations 6713

24Today’s action for both vehicles and fuels will

apply in 49 states and the U.S. territories, excluding

only California. There will also be emissions

reductions in California from vehicles that relocate

or visit from other states. However, much of the

emissions inventory analysis for this action was

made for a 47-state region which excludes

California, Alasks, and Hawaii. The latter two states

were not included in the scope of ozone, PM and

economic benefits modeling.

trucks will produce about 50 percent of

combined car and light truck NOX

emissions. We project that truck

emissions would actually increase after

2000, and over the next 30 years, trucks

would grow to dominate light-duty NOX

emissions. By 2010, we project trucks

would make up two-thirds of light-duty

NOX emissions; by 2020, nearly threequarters of all light-duty NOX emissions

would be produced by trucks.

BILLING CODE 6560–50–P

BILLING CODE 6560–50–C

Today’s action will significantly decrease NOX and VOC emissions from cars and light trucks, and will delay the

date by which NOX and VOC emissions will begin to increase due to continued VMT growth. With Tier 2/Gasoline

Sulfur control, light-duty vehicle NOX and VOC emissions are projected to continue their downward trend past 2020.

Table III.B–3 shows the annual tons of NOX that we project will be reduced by today’s action.24 These projections

include the benefits of low sulfur fuel and the introduction of Tier 2 car and light truck standards.

TABLE III.B–3.—NOX EMISSIONS FROM CARS AND LIGHT TRUCKS AS PERCENT OF TOTAL EMISSIONS, AND REDUCTIONS

DUE TO TIER 2/GASOLINE SULFUR CONTROL (TONS PER YEAR) a

Year

Light-duty

tons— without

tier 2

Light-duty percent of total

without tier 2

Light-duty tons

reduced by tier

2 c, c

2007 ............................................................................................................................................. 3,095,698 16 856,471

2010 ............................................................................................................................................. 2,962,093 16 1,235,882

2015 ............................................................................................................................................. 2,968,707 17 1,816,767

2020 ............................................................................................................................................. 3,160,155 17 2,220,210

6714 Federal Register / Vol. 65, No. 28 / Thursday, February 10, 2000 / Rules and Regulations

25California Air Resources Board, Executive

Order G–99–037, May 20, 1999, Attachment A, 6–

7, 10. These NOX reductions represent a small fraction of the emission reductions needed in the

South Coast to attain the NAAQS.

TABLE III.B–3.—NOX EMISSIONS FROM CARS AND LIGHT TRUCKS AS PERCENT OF TOTAL EMISSIONS, AND REDUCTIONS

DUE TO TIER 2/GASOLINE SULFUR CONTROL (TONS PER YEAR) a—Continued

Year

Light-duty

tons— without

tier 2

Light-duty percent of total

without tier 2

Light-duty tons

reduced by tier

2 b, c

2030 ............................................................................................................................................. 3,704,747 19 2,795,551

Notes:

aEstimates exclude California, Alaska, and Hawaii, although reductions will occur in all three.

b Does not include emission reductions from heavy-duty gasoline vehicles.

cThese numbers represent a conservative estimate of the benefits of the Tier 2/Sulfur program. Based on the updated emission factor model

developed in response to comments, the program will result in significantly larger benefits. For example, our new model projects NOX reductions

of 1,100,000 tons in 2007.

The lower sulfur levels in today’s

action will produce large emission

reductions on pre-Tier 2 vehicles as

soon as low-sulfur gasoline is

introduced, in addition to enabling Tier

2 vehicles to achieve lower emission

levels. Among the pre-Tier 2 vehicles,

the largest per vehicle emission

reductions from lower sulfur in gasoline

will be achieved from vehicles which

automobile manufacturers will have

sold under the voluntary National Low

Emission Vehicle program. These

vehicles are capable of substantially

lower emissions when operated on low

sulfur fuel. Older technology vehicles

experience a smaller but significant

effect.

In 2007, when all gasoline will meet

the new sulfur limit and when large

numbers of 2004 and newer vehicles

meeting these standards will be in use,

the combined NOX emission reduction

from vehicles and fuels will be over

850,000 tons per year. After 2007,

emissions will be reduced further as the

fleet turns over to Tier 2 vehicles

operating on low sulfur fuel. By 2020,

NOX emissions will be reduced by 70%

from the levels that would occur

without today’s action. This reduction

equals the NOX emissions from over 164

million pre-Tier 2 cars and light trucks.

This reduction represents a 12 percent

reduction in NOX emissions from all

manmade sources.

VOC emissions will also be reduced

by today’s action, with reductions

increasing as the fleet turns over. We

estimate that the reductions as a percent

of emissions from cars and light trucks

will be 7 percent in 2007 and grow to

17 percent in 2020.

As discussed earlier, in California,

smaller but still substantial reductions

in both NOX and VOC will be achieved

because vehicles visiting and relocating

to California will be designed to meet

these standards. Also, vehicles from

California visiting other states will not

be exposed to high sulfur fuel.

California Air Resources Board staff

have estimated that Tier 2/Sulfur will

reduce NOX emissions in the South

Coast Air Quality Management District

by approximately 4 tons per day in

2007.25 CARB staff plan to incorporate

these reductions in their revised

attainment plan for this district, which

includes most of the Los Angeles-Long

Beach region.

These estimates of emission

reductions reflect a mixture of urban,

suburban, and rural areas. However,

cars and light trucks generally make up

a larger fraction of the emission

inventory for urban and suburban areas,

where human population and personal

vehicle travel is more concentrated than

emissions from other sources such as

heavy-duty highway vehicles, power

plants, and industrial boilers. We have

estimated emission inventories for three

cities using the same methods as were

used to project the nationwide

inventories, and we present the results

for 2007 below in Table III.B–4.

These results confirm that light-duty

vehicles make up a greater share of the

NOX emission inventories in urban

areas than they do in the nationwide

inventory. While these vehicles’ share of

national NOX emissions in 2007 is about

16 percent, it is estimated to be about

34 percent in the Atlanta area. There is

also a range in VOC contributions, with

Atlanta again being the area with the

largest car and light truck contribution

at 17 percent. In metropolitan areas with

high car and light truck contributions,

today’s action will represent a larger

step towards attainment since it will

have a larger effect on total emissions.

TABLE III.B–4—Proportion of the Total Urban Area NOX and VOC Inventory in 2007 Attributable to Light-Duty

Vehiclesa

Region NOX

(percent)

VOC

(percent)

Nationwide ....................................................................................................................................................................... 16 13

New York urban area ...................................................................................................................................................... 18 6

Atlanta urban area ........................................................................................................................................................... 34 17

Charlotte urban area ........................................................................................................................................................ 24 15

Notes:

a The estimates reflect continuation of NLEV beyond 2004.

Another useful perspective from

which to view the magnitude of the

emission reductions from today’s

proposal is in terms of the additional

emission reductions from all human

sources that areas will need to attain the

1-hour ozone standard. For this

analysis, we reviewed our proposals for

action on the 1-hour attainment

demonstrations submitted by the states.

With these proposals, EPA identified

estimates of additional emission

reductions (measures in addition to

those submitted by the state in their

plans) necessary for attainment for some

Federal Register / Vol. 65, No. 28 / Thursday, February 10, 2000 / Rules and Regulations 6715

26EPA assessment of air quality changes for 2007

and 2030 focused on 37 states in the East because

these states cover most of the areas with 1-hour

nonattainment problems.

of the areas. These estimates of

additional emission reductions are

documented in the individual Federal

Register Notices. Using these estimates

and the estimates of Tier 2 reductions

developed for today’s action, we have

determined what portion of these

additional emission reductions would

be accounted for by today’s action.

These estimates are reported in Table

III.B–5, which shows the contribution of

Tier 2/Sulfur NOX reductions to the

additional emission reduction necessary

for attainment for three metropolitan

areas. For example, for the New York

nonattainment area, 89% of the

additional NOX emission reductions

needed for attainment are provided for

with today’s action. This leaves 11% of

the additional NOX emission reductions

to be addressed by the State through

other local sources.

EPA and the States already have

significant efforts underway to lower

ozone precursor emissions through

national regulations and State

Implementation Plans. Table III.B–5

shows the contribution of Tier 2 to the

substantial State-led efforts to provide

attainment with the ozone NAAQS.

Since the Tier 2 program has evolved in

the past year after much of the States’

efforts were completed, many of the

States were unable to estimate the

benefits of Tier 2 in their areas. EPA’s

proposal actions on these SIPs for the

ozone NAAQS addresses the need for

Tier 2 in many areas. More specifically,

Tier 2 is being used to help States

identify additional measures, in

addition to those in their plans,

necessary for attainment.

These estimates are subject to change

as the states review and comment on

our proposed action on the SIPs. These

figures show that today’s proposal

would make a very substantial

contribution to these cities’ attainment

programs, but that there will still be a

need for additional reductions from

other sources. The emission reductions

from today’s proposal would clearly not

exceed the reductions needed from an

air quality perspective for these areas.

TABLE III.B–5.—CONTRIBUTION OF TIER 2/SULFUR NOX REDUCTIONS TO OZONE ATTAINMENT EFFORTS OF SELECTED

NONATTAINMENT AREAS

Nonattainment area (attainment date)

Percent of additional NOX

reductions necessary for

attainment

From tier 2 Needed

after tier 2

Baltimore (2005) .............................................................................................................................................................. 100 0

New York (2007) .............................................................................................................................................................. 89 11

Philadelphia (2005) .......................................................................................................................................................... 87 13

4. Ozone Reductions Expected From

This Rule

The large reductions in emissions of

ozone precursors from today’s standards

will be very beneficial to federal and

state efforts to lower ozone levels and

bring about attainment with the current

one-hour ozone standard. The air

quality modeling for the final rule

shows that improvements in ozone

levels are expected to occur throughout

the country because of the Tier 2/

Gasoline Sulfur program.26 EPA found

that the program significantly lowers

model-predicted exceedances of the

ozone standard. In 2007 the number of

exceedances in CMSA/MSAs is

forecasted to decline by nearly onetenth and in 2030, when full turnover of

the vehicle fleet has occurred, the

program lowers such exceedances by

almost one-third. In these same areas,

the total amount of ozone above the

NAAQS is forecasted to decline by

about 15 percent in 2007 and by more

than one-third in 2030. In the vast

majority of areas, the air quality

modeling predicts that the program will

lower peak summer ozone

concentrations for both 2007 and 2030.

The reduction in daily maximum ozone

is nearly 2 ppb on average in 2007 and

over 5 ppb on average in 2030. These

reductions contribute to EPA’s

assessment that the program will

provide the large set of public health

and environmental benefits summarized

in Section IV.D of the Preamble. The

forecasted impacts of the program on

ozone in 2007 and 2030 are further

described in the Tier 2 Air Quality

Modeling Technical Support Document.

During the public comment period on

the proposed rule, EPA received several

comments that expressed concern about

potential increases in ozone that might

occur as a result of this rule. As

indicated above, the air quality

modeling results indicate an overall

reduction in ozone levels in 2007 and

2030 during the various episodes

modeled. In addition to ozone

reductions, a few areas had predicted

ozone increases in portions of the area

during parts of the episodes modeled. In

most of these cases, we observed a net

reduction in ozone levels in these areas

due to the program. In the very small

number of exceptions to this, the

Agency did find benefit from reduction

of peak ozone levels. Based upon a

careful examination of this issue,

including EPA’s modeling results as

well as consideration of the modeling

and analyses submitted by commenters,

it is clear that the significant ozone

reductions from this rule outweigh the

limited ozone increases that may occur.

Additional details on this issue are

provided in the Response to Comments

document and in the Tier 2 Air Quality

Modeling Technical Support Document.

Taken together, EPA believes these

results indicate that it will be much

easier for States to develop State

Implementation Plans which will attain

and maintain compliance with the onehour ozone standard. EPA will work

with States conducting more detailed

local modeling of their specific ozone

situation, to ensure that their SIPs will

provide attainment. Notably, there are

also other upcoming federal measures to

lower ozone precursors that will aid

these efforts. If the State modeling of

local programs shows a need, the

Agency will work with states to plan

further actions to produce attainment

with the NAAQS in order to protect the

public’s health and the environment.

Further details on EPA’s modeling

results can be found in the Agency’s

Response to Comments and technical

support documents.

C. Particulate Matter

The need to control the contribution

of cars and light trucks to ambient

concentrations of particulate matter

(PM) is the basis for our adoption of the

new PM emission standards for

vehicles. PM is also a supplemental

consideration in our promulgation of

6716 Federal Register / Vol. 65, No. 28 / Thursday, February 10, 2000 / Rules and Regulations

27U.S. EPA (1998) National Air Pollutant

Emission Trends Update, 1970–1997. EPA–454/E–

98–007. There is evidence from ambient studies

that emissions of these materials may be

overestimated and/or that once emitted they have

less of an influence on monitored PM

concentrations (of both PM10 and PM2.5) than this

inventory share would suggest.

the vehicle emission standards for NOX

and VOC, and for the limits on sulfur in

gasoline, because SOx, NOX, and VOC

are PM precursors.

For cars and for light trucks under

3750 pounds loaded vehicle weight, we

are establishing new emission standards

under the provisions of CAA section

202(i), which ties our action to the need

for additional emission reductions in

order to attain and maintain the

NAAQS. The NAAQS relevant to the

PM emission standards is the PM10

NAAQS. The PM10 NAAQS also

provides additional but not essential

support to our promulgation of the NOX

and VOC standards, since these

standards are fully supportable on the

basis of the 1-hour ozone NAAQS.

For the vehicles not subject to CAA

202(i), and for the gasoline sulfur limits,

our actions are tied to determinations

regarding public health and welfare

risks more broadly, under CAA sections

202(a), 202(b), and 211(c). The role of

NOX, VOC, and PM emissions in

contributing to atmospheric

concentrations of PM10 is an important

element of the risk that these emissions

pose to public health and welfare.

PM also poses risks to public health

not fully reflected in the PM10 NAAQS.

Though EPA has not relied on the

adverse health impacts of fine PM to

promulgate this rule, it is well

established that such impacts exist. A

summary of these effects is given in the

next section. In addition, based on the

available science, EPA’s Office of

Research and Development has recently

submitted to a committee of our Science

Advisory Board a draft assessment

document which contains a proposed

conclusion that diesel exhaust is a likely

human cancer hazard and is a potential

cause of other nonmalignant respiratory

effects. The scientific advisory

committee has met to discuss this

document, and we are awaiting written

review comments from the committee.

We expect to submit a further revision

of the document to the advisory

committee before we make the

document final.

1. Background on PM

Particulate matter (PM) represents a

broad class of chemically and physically

diverse substances that exist as discrete

particles (liquid droplets or solids) over

a wide range of sizes. The NAAQS that

regulates PM addresses only PM with a

diameter less than or equal to 10

microns, or PM10. The coarse fraction of

PM10 consists of those particles which

have a diameter in the range between

2.5 and 10 microns, and the fine fraction

consists of those particles which have a

diameter less than or equal to 2.5

microns, or PM2.5. These particles and

droplets are produced as a direct result

of human activity and natural processes,

and they are also formed as secondary

particles from the atmospheric

transformation of emissions of SOX,

NOX, ammonia, and VOCs.

Natural sources of particles in the

coarse fraction of PM10 include

windblown dust, salt from dried sea

spray, fires, biogenic emanation (e.g.,

pollen from plants, fungal spores), and

volcanoes. Fugitive dust and crustal

material (geogenic materials) comprise

approximately 80% of the coarse

fraction of the PM10 inventory as

estimated by methods in use today.27

Manmade sources of these coarser

particles arise predominantly from

combustion of fossil fuel by large and

small industrial sources (including

power generating plants, manufacturing

plants, quarries, and kilns), wind

erosion from crop land, roads, and

construction, dust from industrial and

agricultural grinding and handling

operations, metals processing, and

burning of firewood and solid waste.

Coarse-fraction PM10 remains

suspended in the atmosphere a

relatively short period of time.

Most of the emission sources listed for

coarse particles also have a substantial

fine particle fraction. Their share of the

PM2.5 inventory is somewhat smaller,

however, because of the role of other

sources that give rise primarily to PM2.5.

The other sources of PM2.5 include

carbon-based particles emitted directly

from gasoline and diesel internal

combustion engines, sulfate-based

particles formed from SOX and

ammonia, nitrate-based particles formed

from NOX and ammonia, and

carbonaceous particles formed through

transformation of VOC emissions. PM2.5

particles from fugitive dust and crustal

sources comprise substantially less than

their share of coarse PM emissions,

approximately one-half of the directly

emitted PM2.5 inventory as estimated by

methods in use today. The presence and

magnitude of crustal PM2.5 in the

ambient air is much lower even than

suggested by this smaller inventory

share, due to the additional presence of

secondary PM from non-crustal sources

and the removal of a large portion of

crustal emissions close to their source.

This near-source removal results from

crustal PM’s lack of inherent thermal

buoyancy, low release height, and

interaction with surrounding vegetation

(which acts to filter out some of these

particles).

Secondary PM is dominated by sulfate

particles in the eastern U.S. and parts of

the western U.S., with nitrate particles

and carbonaceous particles dominant in

some western areas. Mobile sources can

reasonably be estimated to contribute to

ambient secondary nitrate and sulfate

PM in proportion to their contribution

to total NOX and SOX emissions.

The sources, ambient concentration,

and chemical and physical properties of

PM10 vary greatly with time, region,

meteorology, and source category. A

first step in developing a plan to attain

the PM10 NAAQS is to disaggregate

ambient PM10 into the basic categories

of sulfate, nitrate, carbonaceous, and

crustal PM, and then determine the

major contributors to each category

based on knowledge of local and

upwind emission sources. Following

this approach, SIP strategies to reduce

ambient PM concentrations have

generally focused on controlling fugitive

dust from natural soil and soil disturbed

by human activity, paving dirt roads

and controlling soil on paved roads,

reducing emissions from residential

wood combustion, and controlling

major stationary sources of PM10 where

applicable. The control programs to

reduce stationary, area, and mobile

source emissions of sulfur dioxide,

oxides of nitrogen, and volatile organic

compounds in order to achieve

attainment with the sulfur dioxide and

ozone NAAQS also have contributed to

reductions in the fine fraction of PM10

concentrations. In addition, the EPA

standards for PM emissions from

highway and nonroad engines are

contributing to reducing PM10

concentrations. As a result of all these

efforts, in the last ten years, there has

been a downward trend in PM10

concentrations, with a leveling off in the

later years.

Particulate matter, like ozone, has

been linked to a range of serious

respiratory health problems. Scientific

studies suggest a likely causal role of

ambient particulate matter in

contributing to a series of health effects.

The key health effects categories

associated with particulate matter

include premature mortality,

aggravation of respiratory and

cardiovascular disease (as indicated by

increased hospital admissions and

emergency room visits, school absences,

work loss days, and restricted activity

days), changes in lung function and

increased respiratory symptoms,

changes to lung tissues and structure,

and altered respiratory defense

Federal Register / Vol. 65, No. 28 / Thursday, February 10, 2000 / Rules and Regulations 6717

28U.S. EPA, 1996, Air Quality Criteria for

Particulate Matter, EPA/600/P–95/001aF. Review of

the National Ambient Air Quality Standards for

Particulate Matter: Policy Assessment of Scientific

and Technical Information, OAQPS Staff Paper,

EPA–452 R–96–013, July 1996.

29The annual average PM10 NAAQS is based on

a three-year average, and the 24-hour NAAQS is

based on expected exceedances over a three-year

period.

30Health Assessment Document for Diesel

Emissions, SAB Review Draft EPA/600/8–90/057D.

November 1999. The document is available

electronically at http://www.epa.gov/ncea/

diesel.htm.

mechanisms. PM also causes damage to

materials and soiling. It is a major cause

of substantial visibility impairment in

many parts of the U.S.

Motor vehicle particle emissions and

the particles formed by the

transformation of motor vehicle gaseous

emissions tend to be in the fine particle

range. Fine particles are a special health

concern because they easily reach the

deepest recesses of the lungs. Scientific

studies have linked fine particles (alone

or in combination with other air

pollutants), with a series of significant

health problems, including premature

death; respiratory related hospital

admissions and emergency room visits;

aggravated asthma; acute respiratory

symptoms, including aggravated

coughing and difficult or painful

breathing; chronic bronchitis; and

decreased lung function that can be

experienced as shortness of breath.

These effects are discussed further in

EPA’s ‘‘Staff Paper’’ and ‘‘Air Quality

Criteria Document’’ for particulate

matter.28

EPA first established primary (healthbased) and secondary (welfare-based)

National Ambient Air Quality Standards

for PM10 in 1987. The annual and 24-

hour primary PM10 standards were set at

50 μg/m33, and 150 μg/m3,

respectively.29 In July 1997, the primary

standards were revised to add two new

PM2.5 standards. At the same time, we

changed the statistical form of the

primary PM10 standard and set all the

secondary standards to be the same as

the primary.

On May 14, 1999, a panel of the U.S.

Court of Appeals for the District of

Columbia Circuit reviewed EPA’s

revisions to the ozone and PM NAAQS

and found, by a 2–1 vote, that sections

108 and 109 of the Clean Air Act, as

interpreted by EPA, represent

unconstitutional delegations of

Congressional power. American

Trucking Ass’ns, Inc., et al., v.

Environmental Protection Agency, 175

F.3d 1027 (D.C. Cir. 1999). Among other

things the Court remanded the record

for the 8-hour ozone NAAQS and the

PM2.5 NAAQS to EPA. On October 29,

1999, EPA’s petition for rehearing by the

three judge panel was denied, with an

exception regarding the revised ozone

NAAQS. EPA’s petition for rehearing en

banc by the full Circuit was also denied,

although five of the nine judges

considering the petition agreed to rehear

the case.

The pre-existing PM10 NAAQS

remains in effect (except for one area—

Boise, ID—where prior to the court’s

decision we had determined it no longer

to apply). We believe that given the

uncertain status of the new PM2.5

NAAQS, it is most appropriate to rely

primarily on the pre-existing PM10

NAAQS in establishing the Tier 2/

Gasoline Sulfur program’s vehicle

emission standards and limits on sulfur

in gasoline. However, because we

believe, and the Court did not dispute,

that there are very substantial public

health risks from PM2.5 and substantial

health and economic benefits from

reducing PM2.5 concentrations, we have

conducted analyses of the PM2.5 changes

likely to occur from the Tier 2/Gasoline

Sulfur program. These analyses are

summarized in the section of this

preamble dealing with the economic

benefits of the new standards, section

IV.D.5, and corresponding sections of

the final RIA.

There is additional concern regarding

the health effects of PM from diesel

vehicles, apart from the health effects

which were considered in setting the

NAAQS for PM10 and PM2.5. Diesel PM

contains small quantities of chemical

species that are known carcinogens, and

diesel PM as a whole has been

implicated in occupational

epidemiology studies. EPA’s Office of

Research and Development has

considered these studies, and has

recently submitted to a committee of our

Science Advisory Board a draft

conclusion that diesel exhaust is a

‘‘highly likely’’ human cancer hazard.30

Because we are awaiting a formal

response from our advisory committee

before revising and finalizing our

assessment document, we are not

relying on the conclusions in this

document as formal support for our

action today. More information about

this aspect of PM air quality is given in

section III.F of this preamble.

2. Need for Additional Reductions to

Attain and Maintain the PM10 NAAQS

The most recent PM10 monitoring data

indicates that 15 designated PM10

nonattainment counties, with a

population of almost 9 million in 1996,

violated the PM10 NAAQS in the period

1996–1998. The areas that are violating

do so because of exceedances of the 24-

hour PM10 NAAQS. No areas had

monitored violations of the annual

standard in this period. Table III.C–1

lists the 15 counties. The table also

indicates the classification for each area

and the status of our review of the State

Implementation Plan.

TABLE III.C–1.—FIFTEEN PM10 NONATTAINMENT AREAS VIOLATING THE PM10 NAAQS IN 1996–1998 a

Area Classification SIP approved?

1996

Population

(millions)

Clark Co., NV ................................................................................................................. Serious .................... No ..................... 0.93

El Paso, TX .................................................................................................................... Moderate ................. Yes ................... 0.67

Gila, AZ ........................................................................................................................... Moderate ................. No ..................... 0.05

Imperial Co., CA ............................................................................................................. Moderate ................. No ..................... 0.14

Inyo Co., CA ................................................................................................................... Moderate ................. No ..................... 0.02

Kern Co., CA .................................................................................................................. Serious .................... No ..................... 0.62

Mono Co., CA ................................................................................................................. Moderate ................. No ..................... 0.01

Kings Co., CA ................................................................................................................. Serious .................... No ..................... 0.11

Maricopa Co., AZ ........................................................................................................... Serious .................... No ..................... 2.61

Power Co., ID ................................................................................................................. Moderate ................. No ..................... 0.01

Riverside Co., CA ........................................................................................................... Serious .................... No ..................... 1.41

San Bernardino Co., CA ................................................................................................. Serious .................... No ..................... 1.59

Santa Cruz Co., AZ ........................................................................................................ Moderate ................. No ..................... 0.04

Tulare Co., CA ................................................................................................................ Serious .................... No ..................... 0.35

6718 Federal Register / Vol. 65, No. 28 / Thursday, February 10, 2000 / Rules and Regulations

31Regulatory Impact Analyses for the Particulate

Matter and Ozone National Ambient Air Quality

Standards and Proposed Regional Haze Rule,

Innovative Strategies and Economics Group, Office

of Air Quality Planning and Standards, U.S.

Environmental Protection Agency, Research

Triangle Park, N.C., July 16, 1997.

32We used the more recent modeling for 2030

rather than the earlier modeling for 2010, because

the modeling the 2030 incorporates more recent

estimates of emissions inventories. Our emission

estimates in our final RIA indicate that PM10

emissions under the basline scenario increase

steadily between 1996 and 2030, for 47 states

combined and for four specific cities, suggesting

that areas in nonattainment in both 1996–1998 and

2030 will be in nonatainment in the intermediate

years as well assuming no further emission

reductions. A factor tending to make Table III.C–2

shorter is that we have not relied on the sourcereceptor matrix model’s prediction of 24-hour

nonattainment, as those predictions on an

individual areas basis are less reliable than the

predictions of annual average nonattainment.

TABLE III.C–1.—FIFTEEN PM10 NONATTAINMENT AREAS VIOLATING THE PM10 NAAQS IN 1996–1998 a—Continued

Area Classification SIP approved?

1996

Population

(millions)

Walla Walla Co., WA ...................................................................................................... Moderate ................. Yes ................... 0.05

Total Population ................................................................................................... ............................. ...................... 8.61

aAlthough we do not believe that we are limited to considering only designated nonattainment areas in implementing CAA section 202(i), we

have focused on the designated areas in the case of PM10. An official designation of PM10 nonattainment indicates the existence of a confirmed

PM10 problem that is more than a result of a one-time monitoring upset or a results of PM10 exceedances attributable to natural events. In addition to these designated nonattainment areas, there are 15 unclassified counties in 12 geographically spread out states, with a 1996 population

of over 4 million, for which the state has reported PM10 monitoring data for this period indicating a PM10 NAAQS violation. We have not yet excluded the possibility that a one-time monitoring upset or a natural event(s) is responsible for the monitored violations in 1996–1998 in the 15 unclassified counties. We adopted a policy in 1996 that allows areas whose PM10 exceedances are attributable to natural events to remain unclassified if the state is taking all reasonable measures to safeguard public health regardless of the source of PM10 emissions. Areas that remain unclassified areas are not required to submit attainment plans, but we work with each of these areas to understand the nature of the PM10 problem

and to determine what best can be done to reduce it. The Tier 2/Gasoline Sulfur program will reduce PM10 concentrations in these 15 unclassified counties, because all have car and light truck travel that contributes to PM10 and precursor emissions loadings. This reduction will assist

these areas in reducing their PM10 nonattainment problem, if a problem is confirmed upon closer examination of each local situation. Boise, ID,

had also been classified as a PM10 nonattainment area at one time and was monitored to have a PM10 NAAQS violation in 1996–1998. However, the pre-existing PM10 NAAQS does not presently apply in Boise, ID, because in the period between our revision of the old PM10 NAAQS

and the Court’s decision to vacate the revised PM10 NAAQS, we determined that Boise was in attainment with the old PM10 NAAQS and that it

therefore no longer applied in that area.

Because the types and sources of PM10

are complex and vary from area to area,

the best projections of future PM10

concentrations are the local emission

inventory and air quality modeling

analyses that states have developed or

are still in the process of developing for

their PM10 attainment plans. We do

employ a modeling approach, known as

the source-receptor matrix approach, for

relating emission reductions to PM10

reductions on a national scale. This

approach is one of our established air

quality models for purposes of

quantifying the health and welfare

related economic benefits of PM

reductions from major regulatory

actions. One application of this

modeling approach was for the

Regulatory Impact Analysis for the

establishment of the new PM NAAQS 31.

This model is also the basis for the

estimates of PM10 (and PM2.5)

concentrations reductions we have used

to estimate the economic benefits of the

Tier 2/Gasoline Sulfur program in 2030.

Its use for this purpose is described in

the final RIA. In both applications, we

modeled an emissions scenario

corresponding to controls currently in

place or committed to by states. As

such, this scenario is an appropriate

baseline for determining if further

reductions in emissions are needed in

order to attain and maintain the PM10

NAAQS.

In the RIA for the establishment of the

PM NAAQS, we projected that in 2010

there will be 45 counties not in

attainment with the original PM10

NAAQS . We cited these modeling

results in our proposal for the Tier 2/

Gasoline Sulfur program and in our first

supplemental notice. After reviewing

public comments on our presentation of

these modeling results, we have

concluded that while the sourcereceptor matrix approach is a suitable

model for estimating PM concentration

reductions for economic benefits

estimation, it is not a tool we can use

with high confidence for predicting that

individual areas that are now in

attainment will become nonattainment

in the future. However, we believe the

source-receptor matrix approach is

appropriate for, and is a suitable tool

for, determining that a current

designated nonattainment area has a

high risk of remaining in PM10

nonattainment at a future date.

Therefore, we have cross-matched the

results for 2030 from our final RIA for

Tier 2 and the list of current PM10

nonattainment areas with monitored

violations in 1996 to 1998 shown in

Table III.C–1.32 Based on this, we

conclude that the 8 areas shown in

Table III.C–2 have a high risk of failing

to attain and maintain without further

emission reductions. These areas have a

population of nearly 8 million. Included

in the group are the counties that are

part of the Los Angeles, Phoenix, and

Las Vegas metropolitan areas, where

traffic from cars and light trucks is

substantial. California areas will benefit

from the Tier 2/Gasoline Sulfur program

because of travel within California by

vehicles originally sold outside the

state, and by reduced poisoning of

catalysts from fuel purchased outside of

California.

TABLE III.C–2.—EIGHT AREAS WITH A

HIGH RISK OF FAILING TO ATTAIN

AND MAINTAIN THE PM10 NAAQS

WITHOUT FURTHER REDUCTIONS IN

EMISSIONS

Area

1996

population

(millions)

Clark Co., NV ........................... 0.93

Imperial Co., CA ....................... 0.14

Kern Co., CA ............................ 0.62

Kings Co., CA ........................... 0.11

Maricopa Co., AZ ..................... 2.61

Riverside Co., CA ..................... 1.41

San Bernardino Co., CA ........... 1.59

Tulare Co., CA .......................... 0.35

Total population ............. 7.76

Table III.C–2 is limited to designated

PM10 nonattainment areas which both

had monitored violations of the PM10

NAAQs in 1996–1998 and are predicted

to be in nonattainment in 2030 in our

PM10 air quality modeling. This gives us

high confidence that these areas require

further emission reductions to attain

and maintain, but does not fully

Federal Register / Vol. 65, No. 28 / Thursday, February 10, 2000 / Rules and Regulations 6719

33 In fact, in two of these areas, New York Co.,

NY and Harris Co., TX, the average PM10 level in

1998 was above the 50 μg/m3 value of the NAAQS.

These two areas are not included in the Table III.C–

2 list of areas with a high risk of failing to attain

and maintain because lower PM10 levels in 1996

and 1997 caused their three-year average PM10 level

to be lower than the NAAQS. Official

nonattainment determinations for the annual PM10

NAAQS are made based on the average of 12

quarterly PM10 averages.

consider the possibility that there are

other areas which are now meeting the

PM10 NAAQS which have at least a

significant probability of requiring

further reductions to continue to

maintain it. Our air quality modeling

predicted 2030 violations of the annual

average PM10 NAAQS in five additional

counties that in either 1997 or 1998 had

single-year annual average monitored

PM10 levels of at least 90 percent of the

NAAQS, but did not exceed the formal

definition of the NAAQS over the threeyear period ending in 1998 33. These

areas are shown in Table III.C–3. They

have a combined population of almost

17 million, and a broad geographic

spread. Unlike the situation for ozone,

for which precursor emissions are

generally declining over the next 10

years or so before beginning to increase,

we estimate that emissions of PM10 will

rise steadily unless new controls are

implemented. The small margin of

attainment which these areas currently

enjoy will likely erode; the PM air

quality modeling suggests that it will be

reversed. We therefore consider these

areas to each individually have a

significant risk of failing to maintain the

NAAQS without further emission

reductions. There is a substantial risk

that at least some of them would fail to

maintain without further emission

reductions. The emission reductions

from the Tier 2/Gasoline Sulfur program

will help to keep them in attainment.

TABLE III.C–3.—FIVE AREAS WITH A

SIGNIFICANT RISK OF FAILING TO

ATTAIN AND MAINTAIN THE PM10

NAAQS WITHOUT FURTHER REDUCTIONS IN EMISSIONS

Area

1996

population

(millions)

New York Co., NY .................... 1.33

Cuyahoga Co., OH ................... 1.39

Harris, Co., TX .......................... 3.10

San Diego Co., CA ................... 2.67

Los Angeles Co., CA ................ 8.11

Total population ............. 16.6

Taken together and considering their

number, size, and geographic

distribution, these 13 areas are sufficient

to establish the case that additional

reductions are needed in order to attain

and maintain the PM10 NAAQS. This

determination provides additional

support for the NOx and VOC standards

and for the limits on gasoline sulfur,

which are also fully supported on ozone

attainment and health effects

considerations. The sulfate particulate,

sulfur dioxide, NOX, and VOC emission

reductions from the Tier 2/Gasoline

Sulfur program will help the 8 areas in

Table III.C–2 and the 5 areas in Table

III.C.–3 to attain and maintain the PM10

NAAQS. The new PM standards for

gasoline and diesel vehicles are also

supported by this PM10 determination.

We are also establishing the new PM

emissions standard today to avoid the

possibility that PM10 concentrations in

these and other areas do get even worse

due to an increase in sales of diesel

vehicles, which could create a need for

further reductions which would be

larger and would affect more areas of

the country. At the present time,

virtually all cars and light trucks being

sold are gasoline fueled. The ambient

PM10 air quality data for 1996 to 1998

reflects that current situation, and this

data was an important factor in what

areas are listed in Tables III.C–2 and

III.C–3. Also, the predictions of future

PM10 air quality, used to develop the

Tables III.C–2 and III.C–3 lists of areas

with high or significant risk of being

unable to attain and maintain, are based

on an assumption that this will continue

to be true. However, we are concerned

over the possibility that diesels will

become more prevalent in the car and

light-duty truck fleet, since automotive

companies have announced their desire

to increase their sales of diesel cars and

light trucks. Because current diesel

vehicles emit higher levels of PM10 than

gasoline vehicles, a larger number of

diesel vehicles could dramatically

increase levels of exhaust PM10,

especially if more stringent PM

emissions standards are not in place.

The new PM emissions standards will

ensure that an increase in the sales of

diesel cars and light trucks will not

increase PM emissions from cars and

light trucks so substantially as to

endanger PM10 attainment and

maintenance on a more widespread

basis. Given this potential, it is

appropriate to establish the new PM

emissions standards now on the basis of

the increase in sales of diesel vehicles

being a reasonable possibility without

such standards. Establishing the new

PM emissions standards now avoids the

public health impact and industry

disruption that could result if we waited

until an increase in sales of diesels with

high PM emissions had already

occurred.

In order to assess the potential impact

of increased diesel sales penetration on

PM emissions, we analyzed the increase

in PM10 emissions from cars and trucks

under a scenario in which the use of

diesel engines in cars and light trucks

increases. We used projections

developed by A.D. Little, Inc. as part of

a study conducted for the American

Petroleum Institute. The ‘‘Most Likely’’

case projected by A.D. Little forecasts

that diesel engines’’ share of the light

truck market will grow to 24 percent by

the 2015 model year. Diesel engines’

share of the car market would grow

somewhat more slowly, reaching 9

percent by 2015. The A.D. Little

forecasts did not address the period

after 2015; we have assumed that diesel

sales stabilize at the level reached in

2015, with the fraction of in-use

vehicles with diesel engines continuing

to increase through turnover. We believe

these projections are more realistic than

the scenario of even higher sales of

diesels described in the notice for the

proposed Tier 2/Gasoline Sulfur

program, though the A.D. Little forecasts

still show much higher percentages of

diesel vehicles in the light-duty fleet

than have ever existed historically in

the U.S.

The A.D. Little scenario of increased

diesels, and even more so the scenario

described in our proposal, would result

in dramatic increases in direct PM10

emissions from cars and light trucks, if

there were no change in these vehicles’

PM standards. The increase in diesel

exhaust PM10 emissions would more

than overcome the reduction in direct

PM10 attributable to the sulfur reduction

in gasoline. With no change in the

existing PM standards for cars and light

trucks, our analysis of this scenario

shows that direct PM10 emissions in

2020 would be approximately 98,000

tons per year, which is nearly two times

the 50,000 tons projected if diesel sales

do not increase. The portion of ambient

PM10 concentrations attributable to cars

and light trucks would climb steadily.

The final RIA presents alternative

estimates of the amount by which future

PM10 concentrations could increase due

to such an emissions increase, based on

extrapolations from several studies’

estimates of the contribution that heavyduty diesel vehicles have made to recent

or PM10 concentrations. The increase is

estimated to range from 0.6 to 20 μg/m3.

The added PM10 emissions from cars

and trucks due to an increase in diesel

sales without action to reduce PM10

from new diesel vehicles would

exacerbate the PM10 nonattainment

problems of the areas listed in Tables

6720 Federal Register / Vol. 65, No. 28 / Thursday, February 10, 2000 / Rules and Regulations

III.C–2 and III.C–3, for which our air

quality modeling predicted future

nonattainment even without an increase

in diesel sales. Moreover, it might cause

PM10 nonattainment in additional areas.

In addition to the counties already listed

in Tables III.C–2 and III.C–3, there are

other areas for which 1997 and 1998

data indicate that maintenance of the

PM10 NAAQS is at risk if diesel sales of

cars and light truck increase. Table

III.C–4 lists additional counties for

which either 1997 or 1998 monitoring

data, or both, indicated a second-high

PM10 concentration for the single year

within 10 percent of the PM10 24-hour

NAAQS or an annual average PM10

concentration within 10 percent of the

annual average PM10 NAAQS. Only

counties which are part of metropolitan

statistical areas are listed in Table III.C–

4, in order to focus on those in which

traffic densities are high. Considering

both the annual and 24-hour NAAQS,

there were 13 areas within 10 percent of

the standard. Increases in PM10

emissions from more diesel vehicles

would put these areas in greater risk of

violating the PM10 NAAQS, especially if

growth in other sources is high or

meteorological conditions are more

adverse than in the 1996 to 1998 period.

TABLE III.C–4.—THIRTEEN METROPOLITAN STATISTICAL AREA COUNTIES WITH 1997 AND/OR

1998 AMBIENT PM10 Concentrations Within

10 Percent of the Annual or 24-Hour the

PM10 NAAQSa

1996

population

(millions)

Areas within 10 percent of the annual PM10

NAAQS:

Lexington Co., SC ........................... 0.20

Union Co., TN ................................. 0.02

Washoe Co., NV ............................. 0.30

Madison Co., IL ............................... 0.26

Dona Ana Co., NM .......................... 0.16

El Paso Co., TX .............................. 0.68

Ellis Co., TX .................................... 0.97

Fresno Co., CA ............................... 0.74

Philadelphia Co., PA ....................... 1.47

Areas within 10 percent of the 24-hour PM10

NAAQS:

Lexington Co., SC ........................... 0.20

El Paso Co., TX .............................. 0.68

Union Co., TN ................................. 0.02

Mobile Co., AL ................................ 0.40

Dona Ana Co., NM .......................... 0.16

Lake Co., IN .................................... 0.48

Philadelphia Co., PA ....................... 1.47

Pennington Co., SD ........................ 0.09

Ventura Co., CA .............................. 0.71

Total Population of all 13

areas ................................. 6.48

Notes:

aThese areas are listed based on their second

high 24-hour concentration and annual average concentration in 1997, 1998, or both. Official nonattainment determinations are made based on three years

of data, and on estimates of expected exceedances

of the 24-hour standard.

Fortunately, the standards included in

today’s actions will result in a steady

decrease in total direct PM10 from cars

and light trucks even if this increase in

the use of diesel engines in these

vehicles were to occur. If the A.D. Little

‘‘Most Likely’’ scenario for increased

diesel engines in light trucks were to

occur, today’s actions would reduce

diesel PM10 from cars and light trucks

by over 75 percent in 2020. Stated

differently, by 2030 today’s actions

would reduce 98,000 tons of the

potential increase in PM10 emissions

from passenger cars and light trucks.

The result would be less direct PM10

than is emitted today, because the

increase in diesel PM10 would be more

than offset by the reduction in PM10

emissions from gasoline vehicles

resulting from lower gasoline sulfur

levels.

We are establishing tighter PM

standards for cars and light trucks to

help avoid the adverse impact of greater

diesel PM emissions on PM10 attainment

and public health and welfare if diesel

sales increased in the future without the

protection of the tighter standards.

Because diesel vehicles will essentially

be performing the same functions as the

gasoline vehicles they will replace, it is

appropriate for the new PM standards to

also apply equally to gasoline and diesel

vehicles. We expect that gasoline

vehicles will need little or no redesign

to meet the new PM standards when

free of defects and properly operating.

However, the new vehicle and gasoline

sulfur standards may achieve some

reduction in real world PM emissions

from gasoline vehicles by encouraging

more durable designs and by ensuring

that these vehicles are operated on

lower-sulfur fuel. The new standards for

PM will also prevent any changes in

gasoline engine design which would

increase PM emissions. These changes

would otherwise be possible because

the current PM standard is so much

higher than the current performance on

the gasoline vehicles.

3. PM2.5 Discussion

We are not basing our promulgation of

the Tier 2 vehicle standards on a finding

on the need for additional emission

reductions in order to attain and

maintain the NAAQS for PM2.5. We are

providing this information to explain

that this program will result in

substantial benefit in reduction of PM2.5

concentrations, to an even broader set of

geographic areas than will benefit in

terms of PM10 attainment.

The annual and 24-hour PM2.5

NAAQS set in 1997 are numerically

much lower than the corresponding

PM10 standards: 15 versus 50 μg/m3 for

the annual average standards and 65

versus 150 μg/m3 for the 24-hour

average standards. While geographically

broad PM2.5 monitoring is just now

reaching the end of the first of three

years of operation needed to determine

compliance, our best analysis from the

more limited PM2.5 conducted in some

areas indicates that many areas that are

in compliance with the PM10 standards

will be found to be in violation of the

annual average PM2.5 standard.

Violations of the 24-hour PM2.5 standard

appear to be infrequent.

Therefore, if we considered it

appropriate to proceed with

implementing the PM2.5 NAAQS, we are

confident that there would be a larger

set of areas for which we would

determine that further reductions in

emissions are needed in order to attain

and maintain the NAAQS.

Moreover, gasoline and diesel cars

and light trucks have a more important

contributing role for ambient PM2.5

concentrations, and other emission

sources that play a major role in

ambient PM10 concentrations will be

relatively less important. Cars and light

trucks contribute essentially the same

absolute amount to ambient

concentrations of PM10 and of PM2.5.

However, most other sources contribute

much more to PM10 than to PM2.5, so the

relative contribution from cars and light

trucks is larger. In addition, the absolute

contribution from cars and light trucks

is larger in relationship to the

numerically lower PM2.5 standard,

making them more important to

attainment and maintenance. This is

also true for the potential contribution

that more diesel cars and light trucks

would make to ambient PM2.5

concentrations.

4. Emission Reductions and Ambient

PM Reductions

The NOX and VOC emission

reductions from the Tier 2/Gasoline

Sulfur program are presented in the

ozone section above. The SOX and PM

reductions are presented in our final

RIA, and are essentially unchanged from

those presented in our proposal, except

for the revision of the diesel sales

scenario discussed above.

Because virtually all of the PM

reduction from the Tier 2/Gasoline

Federal Register / Vol. 65, No. 28 / Thursday, February 10, 2000 / Rules and Regulations 6721

34 ‘‘National Parks and the American Public: A

National Public Opinion Survey on the National

Park System,’’ Summary Report, National Parks and

Conservation Association, June 1998.

35 ‘‘Recommendations for Improving Western

Vistas,’’ Report of the Grand Canyon Visibility

Transport Commission to the United States

Environmental Protection Agency, June 10, 1996.

Sulfur program is in the fine fraction of

PM10, our estimates of the PM2.5 and

PM10 reductions are essentially the

same. Estimates of the ambient PM

reductions in 2030 in different parts of

the nation, after full phase in of the

vehicle standards, are presented in the

final RIA. The reductions in ambient

PM are largest in the parts of the

country with more vehicle travel, i.e,

larger in the east than in the west and

larger in urban areas than in rural areas.

In the eastern half of the nation, the

reductions in annual average PM

concentrations range from 0.2 to over

1.2 micrograms per cubic meter.

D. Other Criteria Pollutants: Carbon

Monoxide, Nitrogen Dioxide, Sulfur

Dioxide

The standards being promulgated

today will help reduce levels of three

other pollutants for which NAAQSs

have been established: carbon monoxide

(CO), nitrogen dioxide (NO2), and sulfur

dioxide (SO2). As of 1998, every area in

the United States has been designated to

be in attainment with the NO2 NAAQS.

As of 1997, one area (Buchanan County,

Missouri) did not meet the primary SO2

short-term standard, due to emissions

from the local power plant. There are

currently 20 designated CO

nonattainment areas, with a combined

population of 33 million. There are also

24 designated maintenance areas with a

combined population of 22 million.

However, the broad trends indicate that

ambient levels of CO are declining. In

1997, 6 of 537 monitoring sites reported

ambient CO levels in excess of the CO

NAAQS.

The reductions in SO2 precursor

emissions from today’s actions are

essentially equal to the SOX reductions

described in Section III.B. and III.C.,

respectively. The impact of today’s

actions on NO2 emissions depends on

the specific emission control

technologies used to meet the Tier 2

vehicle emission standards. However,

essentially all of the NOX emitted by

cars and light trucks converts to NO2 in

the atmosphere; therefore, it is

reasonable to assume that today’s

actions will substantially reduce

ambient NO2 levels by the same

proportion. Today’s rule also will

require light trucks to meet more

stringent CO standards. These more

stringent standards will help extend the

trend towards lower CO emissions from

motor vehicles and thereby help the

remaining CO nonattainment areas

reach attainment while helping other

areas remain in attainment with the CO

NAAQS. Our analysis of CO reductions

from today’s program is found in

Chapter III of the RIA. The analysis of

economic benefits and costs found in

Section IV.D.–5. does not account for

the economic benefits of the CO

reductions expected to result from

today’s proposal.

E. Visibility

Visibility impairment occurs as a

result of the scattering and absorption of

light by particles and gases in the

atmosphere. It is most simply described

as the haze that obscures the clarity,

color, texture, and form of what we see.

The principal cause of visibility

reduction is fine particles between 0.1

and 1 μm in size. Of the pollutant gases,

only NO2 absorbs significant amounts of

light; it is partly responsible for the

brownish cast of polluted skies. While

the contribution of NO2 to visibility

impairment varies from area to area, it

is generally responsible for less than ten

percent of visibility reduction.

The CAA requires EPA to protect

visibility, or visual air quality, through

a number of programs. These programs

include the national visibility program

under Sections 169a and 169b of the

Act, the Prevention of Significant

Deterioration program for the review of

potential impacts from new and

modified sources, and the secondary

NAAQS for PM10 and PM2.5. The

national visibility program established

in 1980 requires the protection of

visibility in 156 mandatory federal Class

I areas across the country (primarily

national parks and wilderness areas).

More than 65 million visitors travel

each year to these parks and wilderness

areas. The CAA established as a national

visibility goal, ‘‘the prevention of any

future, and the remedying of any

existing, impairment of visibility in

mandatory federal Class I areas in which

impairment results from manmade air

pollution.’’ The Act also calls for state

programs to make ‘‘reasonable progress’’

toward the national goal. In addition, a

recent national opinion poll on the state

of the national parks found that more

than 80 percent of Americans believe air

pollution affecting these parks should

be cleaned up for the benefit of future

generations.34

There has been improvement in

visibility in the western part of the

country over the last ten years.

However, visibility impairment remains

a serious problem in Class I areas.

Visibility in the East does not seem to

have improved. As one part of

addressing this national problem, EPA

has required states to adopt and

implement effective plans for protecting

and improving visibility in Class I

federal areas (64 FR 35714, July 1,

1999).

Today’s actions will result in

visibility improvements due to the

reduction in local and upwind PM and

PM precursor emissions. Since mobile

source emissions contribute to the

formation of visibility-reducing PM,

control programs that reduce the mobile

source emissions of direct and

secondary PM would have the effect of

improving visibility. The Grand Canyon

Visibility Transport Commission’s final

recommendations report 35 found that

reducing total mobile source emissions

is an essential part of any program to

protect visibility in the Western U.S.

The Commission found that motor

vehicle exhaust is responsible for about

14 percent of human-caused visibility

reduction (excluding road dust). A

substantial portion of motor vehicle

exhaust comes from cars and light

trucks. In light of that impact, the

Commission’s recommendations in 1996

supported federal Tier 2/Gasoline Sulfur

standards, as EPA is proposing today.

More recently, a number of Western

Governors noted the importance of

controlling mobile sources as part of

efforts to improve visibility in their

comments on the Regional Haze Rule

and on the need to protect the 16 Class

I areas on the Colorado Plateau. In their

joint letter dated June 29, 1998, they

stated that, ‘‘* * * the federal

government must do its part in

regulating emissions from mobile

sources that contribute to regional haze

in these areas. * * *’’ and called on

EPA to make a ‘‘binding commitment

* * * to fully consider the

Commission’s recommendations related

to the * * * federal national mobile

source emission control strategies.’’

These recommendations included Tier 2

vehicle standards and reductions in

gasoline sulfur levels.

The recent Northern Front Range Air

Quality Study provides another

indication of how important car and

light truck emissions can be to fine PM

and visibility. This study reported

findings that indicate that cars and light

trucks are responsible for 39 percent of

fine PM at a site within the metropolitan

Denver area, and for 40 percent at a

downwind rural site. This contribution

includes both direct PM and indirect

PM formed from sulfur dioxide and

NOX from these vehicles.

6722 Federal Register / Vol. 65, No. 28 / Thursday, February 10, 2000 / Rules and Regulations

36EPA’s diesel health assessment (Health

Assessment Document for Diesel Emissions, SAB

Review Draft, U.S. Environmental Protection

Agency, Washington, DC. EPA/600/8–90/057D,

November 1999) can be found at the following EPA

website: http://www.epa.gov/ncea/diesel.htm.

37National Institute for Occupational Safety and

Health (1988) Carcinogenic effects of exposure to

diesel exhaust. NIOSH Current Intelligence Bulletin

50. DHHS (NIOSH) Publication No. 88–116. Centers

for Disease Control, Atlanta, GA.

International Agency for Research on Cancer

(1989) Diesel and gasoline engine exhausts and

some nitroarenes, Vol. 46. Monographs on the

evaluation of carcinogenic risks to humans. World

Health Organization, International Agency for

Research on Cancer, Lyon, France.

World Health Organization (1996) Diesel fuel and

exhaust emissions: International program on

chemical safety. World Health Organization,

Geneva, Switzerland.

California Environmental Protection Agency,

Office of Environmental Health Hazard Assessment:

Proposed Identification of Diesel Exhaust as a Toxic

Air Contaminant, Part B Health Risk Assessment for

Diesel Exhaust. April 22, 1998.

38California Environmental Protection Agency,

Office of Environmental Health Hazard Assessment:

Proposed Identification of Diesel Exhaust as a Toxic

Air Contaminant, Part B Health Risk Assessment for

Diesel Exhaust. April 22, 1998.

39 ‘‘U.S. Light-Duty Dieselization Scenarios—

Preliminary Study’’, report to the American

Petroleum Institute, July 2, 1999. Prepared by

Arthur D. Little, Inc.

The analysis of economic benefits and

costs found in Section IV.D.5. accounts

for the economic benefits of the

visibility improvements expected to

result from today’s actions.

F. Air Toxics

Section 202(a) provides that EPA may

promulgate standards regulating any air

pollutants that in the Administrator’s

judgment, cause or contribute to air

pollution which may reasonably be

anticipated to endanger public health or

welfare. Section 202(l) provides specific

provisions for regulation of hazardous

air pollutants from motor vehicles and

fuels, and states that at a minimum such

regulations should apply to emissions of

benzene and formaldehyde.

Emissions from cars and light trucks

include a number of air pollutants that

are known or suspected human or

animal carcinogens or that are known or

suspected to have other, non-cancer

health impacts. These pollutants

include benzene, formaldehyde,

acetaldehyde, 1,3-butadiene, and diesel

particulate matter. For several of these

pollutants, motor vehicle emissions are

believed to account for a significant

proportion of total nation-wide

emissions. All of these compounds are

present in exhaust emissions; benzene is

also found in evaporative emissions

from gasoline-fueled vehicles.

The health effects of diesel particulate

matter are of particular relevance to

today’s actions, because of the

possibility for increased diesel-powered

truck sales and the more stringent PM

standard that will apply to these trucks

as a result of today’s actions. While we

have not finalized our decision about

the carcinogenicity of diesel exhaust, we

are in the process of addressing this

question. The Agency’s recently

released draft assessment 36 concludes

that diesel exhaust is a highly likely

human lung cancer hazard, but that the

data are currently unsuitable to make a

confident quantitative statement of risk.

The draft report concludes, however,

that this risk is applicable to ambient

exposures and that the risk may be in

the range of regulatory interest (greater

than one in a million over a lifetime).

Several other agencies and governing

bodies have designated diesel exhaust

or diesel PM as a ‘‘potential’’ or

‘‘probable’’ human carcinogen.37 The

California Air Resources Board (ARB),

for example, found that diesel

particulate matter constituted a toxic air

contaminant and estimated a potency

range of 1.3 × 10¥4 to 2.4 × 10¥3 per μg/

m3.38 The ARB’s findings suggest that

130 to 2400 persons in one million

exposed to 1 μg/m3 of diesel exhaust

particulate continuously for their

lifetime (70 years) would develop

cancer as a result of their exposure.

Because our assessment for diesel

exhaust is not complete, we are not

presenting absolute estimates of how

potential cancer risks from diesel

particulate matter could be affected by

today’s rule. However, we can offer a

qualitative or relative discussion of

these risks. Diesel engines used in

nonroad equipment and heavy-duty

highway vehicles currently constitute a

far larger source of diesel PM than cars

and light-duty trucks, since diesel

engines are used in a very small portion

of the cars and light-duty trucks in

service today. However, engine and

vehicle manufacturers have projected

that diesel engines are likely to be used

in an increasing share of cars and light

trucks, and some manufacturers have

announced capital investments to build

such engines.

If these projections are valid, then the

proportion of cars and light trucks

powered by diesel engines, and the

associated potential health risks from

diesel PM, could increase substantially.

We modeled the most likely level of

increase in light duty diesel engine sales

developed for the American Petroleum

Institute.39 We found that the greater

diesel engine usage in cars and light

trucks resulted in an 80 percent increase

in emissions from all diesel-powered

highway vehicles by 2020—emissions

that have been implicated in potential

cancer risks—assuming no change in the

current light-duty diesel PM standards.

Today’s rule would limit the increase

in the potential cancer risks from cars

and light trucks associated with any

potential increase in light-duty diesel

engines. Using the same sales

projections discussed above, we have

estimated that today’s rule would limit

the increase in total highway diesel PM

emissions in 2020 due to growth in light

duty diesels to under 10 percent, in

contrast to the 80 percent increase

projected to occur without the Tier 2

PM standards. An analogous analysis

that accounted for exposure patterns,

but that assumed even more widespread

use of diesels in the car and light truck

fleet, found that today’s rule would

limit the increase in total highway

diesel PM exposure to about 8 percent.

This analysis is discussed more fully in

Chapter III.F.2 of the Regulatory Impact

Analysis. In addition, the VOC emission

reductions resulting from today’s rule

would reduce the potential cancer risk

posed by air pollutants other than diesel

PM emitted by cars and light trucks,

since many of these pollutants are

themselves VOCs. Furthermore, the rule

would align the formaldehyde standards

for all Tier 2 LDVs and LDTs with the

formaldehyde standards for LDVs and

LDT1s from the NLEV program, thereby

helping to harmonize the Federal and

California formaldehyde standards.

The analysis of economic benefits and

costs found in Section IV.D.5. does not

account for the economic benefits of the

reduction in cancer risk from air toxics

that could result from today’s rule.

Although we have completed a peer

reviewed assessment of the impact of

today’s rule on exposure to toxic

emissions, we have not engaged in a

peer-reviewed assessment of the

baseline air toxics risks (including a

final quantitative risk assessment of the

diesel particulate risks) or of the

reductions that would be achieved by

today’s rule.

We plan to complete our analysis of

air toxics risks as part of our

responsibilities under section 202(l)(2)

of the Clean Air Act, which requires

EPA to establish regulations for the

control of hazardous air pollutants from

motor vehicles. The regulations may

address vehicle emissions or fuel

properties that influence emissions, or

both. We plan to issue a proposal to

address this requirement in April 2000,

and a final rule in December 2000.

Federal Register / Vol. 65, No. 28 / Thursday, February 10, 2000 / Rules and Regulations 6723

40Much of the information in this section was

excerpted from the EPA document, Human Health

Benefits from Sulfate Reduction, written under Title

IV of the 1990 Clean Air Act. Amendments, U.S.

EPA, Office of Air and Radiation, Acid Rain

Division, Washington, DC, November 1995.

41 Vitousek, Peter M., John Aber, Robert W.

Howarth, Gene E. Likens, et al. 1997. Human

Alteration of the Global Nitrogen Cycle: Causes and

Consequences. Issues in Ecology. Published by

Ecological Society of America, Number 1, Spring

1997.

42Much of this information was taken from the

following EPA documenta: Deposition of Air

Pollutants to the Great Waters-Second Report to

Congress, Office of Air Quality Planning and

Standards, June 1997, EPA–453/R–97–011.

43Terrestrial nitrogen deposition can act as a

fertilizer. In some agricultural areas, this effect can

be beneficial.

G. Acid Deposition 40

Acid deposition, or acid rain as it is

commonly known, occurs when SO2

and NOX react in the atmosphere with

water, oxygen, and oxidants to form

various acidic compounds that later fall

to earth in the form of precipitation or

dry deposition of acidic particles. It

contributes to damage of trees at high

elevations and in extreme cases may

cause lakes and streams to become so

acidic that they cannot support aquatic

life. In addition, acid deposition

accelerates the decay of building

materials and paints, including

irreplaceable buildings, statues, and

sculptures that are part of our nation’s

cultural heritage. To reduce damage to

automotive paint caused by acid rain

and acidic dry deposition, some

manufacturers use acid-resistant paints,

at an average cost of $5 per vehicle—a

total of $61 million per year if applied

to all new cars and trucks sold in the

U.S. The general economic and

environmental effects of acid rain are

discussed at length in the RIA.

Acid deposition primarily affects

bodies of water that rest atop soil with

a limited ability to neutralize acidic

compounds. The National Surface Water

Survey (NSWS) investigated the effects

of acidic deposition in over 1,000 lakes

larger than 10 acres and in thousands of

miles of streams. It found that acid

deposition was the primary cause of

acidity in 75 percent of the acidic lakes

and about 50 percent of the acidic

streams, and that the areas most

sensitive to acid rain were the

Adirondacks, the mid-Appalachian

highlands, the upper Midwest and the

high elevation West. The NSWS found

that approximately 580 streams in the

Mid-Atlantic Coastal Plain are acidic

primarily due to acidic deposition.

Hundreds of the lakes in the

Adirondacks surveyed in the NSWS

have acidity levels incompatible with

the survival of sensitive fish species.

Many of the over 1,350 acidic streams

in the Mid-Atlantic Highlands (midAppalachia) region have already

experienced trout losses due to

increased stream acidity. Emissions

from U.S. sources contribute to acidic

deposition in eastern Canada, where the

Canadian government has estimated that

14,000 lakes are acidic. Acid deposition

also has been implicated in contributing

to degradation of high-elevation spruce

forests that populate the ridges of the

Appalachian Mountains from Maine to

Georgia. This area includes national

parks such as the Shenandoah and Great

Smoky Mountain National Parks.

The SOX and NOX reductions from

today’s actions will help reduce acid

rain and acid deposition, thereby

helping to reduce acidity levels in lakes

and streams throughout the U.S. These

reductions will help accelerate the

recovery of acidified lakes and streams

and the revival of ecosystems adversely

affected by acid deposition. Reduced

acid deposition levels will also help

reduce stress on forests, thereby

accelerating reforestation efforts and

improving timber production.

Deterioration of our historic buildings

and monuments, and of buildings,

vehicles, and other structures exposed

to acid rain and dry acid deposition,

also will be reduced, and the costs

borne to prevent acid-related damage

may also decline.

While the reduction in sulfur and

nitrogen acid deposition will be roughly

proportional to the reduction in SOX

and NOX emissions, respectively, the

precise impact of today’s vehicle and

fuel standards will differ across

different areas. Each area is affected by

emissions from different source regions,

and the mobile source contribution to

the total SOX and NOX emission

inventory will differ across different

source regions. Nonetheless, the

projected impact of today’s actions on

SOX and NOX emission inventories

provides a rough indicator of the likely

effect of the Tier 2/Gasoline Sulfur

standards on acid deposition. Our

analysis indicates that today’s actions

will reduce SOX emissions by 1.8

percent and NOX emissions by 14.5

percent in 2030.

The analysis of economic benefits and

costs found in Section IV.D.5. did not

account for the economic benefits of the

reduction in acid deposition expected to

result from today’s actions.

H. Eutrophication/Nitrification

Nitrogen deposition into bodies of

water can cause problems beyond those

associated with acid rain. The

Ecological Society of America has

included discussion of the contribution

of air emissions to increasing nitrogen

levels in surface waters in a recent

major review of causes and

consequences of human alteration of the

global nitrogen cycle in its Issues in

Ecology series 41. Long-term monitoring

in the United States, Europe, and other

developed regions of the world shows a

substantial rise of nitrogen levels in

surface waters, which are highly

correlated with human-generated inputs

of nitrogen to their watersheds. These

nitrogen inputs are dominated by

fertilizers and atmospheric deposition.

Human activity can increase the flow

of nutrients into those waters and result

in excess algae and plant growth. This

increased growth can cause numerous

adverse ecological effects and economic

impacts, including nuisance algal

blooms, dieback of underwater plants

due to reduced light penetration, and

toxic plankton blooms. Algal and

plankton blooms can also reduce the

level of dissolved oxygen, which can

also adversely affect fish and shellfish

populations. This problem is of

particular concern in coastal areas with

poor or stratified circulation patterns,

such as the Chesapeake Bay, Long

Island Sound, or the Gulf of Mexico. In

such areas, the ‘‘overproduced’’ algae

tends to sink to the bottom and decay,

using all or most of the available oxygen

and thereby reducing or eliminating

populations of bottom-feeder fish and

shellfish, distorting the normal

population balance between different

aquatic organisms, and in extreme cases

causing dramatic fish kills.

Collectively, these effects are referred

to as eutrophication, which the National

Research Council recently identified as

the most serious pollution problem

facing the estuarine waters of the United

States (NRC, 1993). Nitrogen is the

primary cause of eutrophication in most

coastal waters and estuaries 42. On the

New England coast, for example, the

number of red and brown tides and

shellfish problems from nuisance and

toxic plankton blooms have increased

over the past two decades, a

development thought to be linked to

increased nitrogen loadings in coastal

waters. Airborne NOX contributes from

12 to 44 percent of the total nitrogen

loadings to United States coastal water

bodies. For example, approximately

one-quarter of the nitrogen in the

Chesapeake Bay comes from

atmospheric deposition.

Excessive fertilization with nitrogencontaining compounds can also affect

terrestrial ecosystems 43. Research

suggests that nitrogen fertilization can

alter growth patterns and change the

6724 Federal Register / Vol. 65, No. 28 / Thursday, February 10, 2000 / Rules and Regulations

balance of species in an ecosystem. In

extreme cases, this process can result in

nitrogen saturation when additions of

nitrogen to soil over time exceed the

capacity of the plants and

microorganisms to utilize and retain the

nitrogen. This phenomenon has already

occurred in some areas of the U.S.

Deposition of nitrogen from cars and

light trucks contributes to these

problems. As discussed in Section III.B.

above, today’s actions will reduce total

NOX emissions by 4.5 percent in 2007

and by 14.5 percent in 2030. The NOX

reductions should reduce the

eutrophication problems associated

with atmospheric deposition of nitrogen

into watersheds and onto bodies of

water, particularly in aquatic systems

where atmospheric deposition of

nitrogen represents a significant portion

of total nitrogen loadings. Since air

deposition accounts for 12–44 percent

of total nitrogen loadings in coastal

waters, the reduction in NOX from

today’s actions is projected to reduce

nitrogen loadings by 0.5–2.0 percent in

2007 and 1.7–6.4 percent in 2030. To

put these reductions in perspective, the

reductions expected in the Chesapeake

Bay area would amount to about 9

percent of the total reduction in

nitrogen loading needed to maintain the

reduction in nutrient loads agreed to by

the signatory states in the Chesapeake

Bay Agreement (40 percent of

‘‘controllable nutrient loads’’ by the year

2000).

The analysis of economic benefits and

costs found in Section IV.D.5. does not

account for the economic benefits of

reduced eutrophication or reduced

terrestrial nitrogen deposition expected

to result from today’s actions.

I. Cleaner Cars and Light Trucks Are

Critically Important to Improving Air

Quality

Despite continued progress in

reducing ozone and PM levels, tens of

millions of Americans are still exposed

to levels of these pollutants that exceed

the National Ambient Air Quality

Standards. Our projections show that

without further action to reduce these

pollutants, tens of millions of

Americans will continue to breathe

unhealthy air for decades to come. Our

projections also show that emissions

from cars and light trucks will continue

to contribute a substantial share of the

ozone and PM precursors in current and

projected nonattainment areas, and in

upwind areas whose emissions

contribute to downwind nonattainment,

unless additional measures are taken to

reduce their emissions. Cars and light

trucks also contribute substantially to

ambient concentrations of CO. These

vehicles will also continue to contribute

to the ambient PM that affects visibility

in Class I federal areas and some urban

areas. Emissions from cars and light

trucks also play a significant role in a

wide range of health and environmental

problems, including known and

potential cancer risks from inhalation of

air pollutants (a problem that could

become more significant if sales of

diesel-powered cars and light trucks

were to increase), health risks from

elevated drinking water nitrate levels,

acidification of lakes and streams, and

eutrophication of inland and coastal

waters.

Today’s actions will reduce NOX,

VOC, CO, PM, and SOX emissions from

these vehicles substantially. These

reductions will help reduce ozone levels

nationwide and reduce the extent and

severity of violations of the 1-hour

ozone standard. These reductions will

also help reduce PM levels, both by

reducing direct PM emissions and by

reducing emissions that give rise to

secondary PM. The CO reductions will

help extend the downward trend in

carbon monoxide levels, thereby

helping the remaining CO

nonattainment areas attain the CO

standard and helping other areas stay in

attainment with the CO standard despite

continued increases in vehicle miles

traveled. The NOX and SOX reductions

will help reduce acidification problems,

and the NOX reductions will help

reduce eutrophication problems and

drinking water nitrate levels. The PM

standards included in today’s actions

will help improve visibility and would

help mitigate adverse health effects in

the event of increases in light-duty

diesel engine sales.

IV. What Are the New Requirements for

Vehicles and Gasoline?

A. Why Are We Proposing Vehicle and

Fuel Standards Together?

1. Feasibility of Stringent Standards for

Light-Duty Vehicles and Light-Duty

Trucks.

a. Gasoline Fueled Vehicles

We believe that the standards being

promulgated today for gasoline-fueled

vehicles are well within the reach of

existing control technology. Our

determination of feasibility is based on

the use of catalyst-based strategies that

are already in use and are well proven

on the existing fleet of vehicles. In fact,

as you will see below, many current

engine families are already certified to

levels at or below the new final Tier 2

requirements. All of the certification

and research testing discussed below

was performed on low-sulfur test fuel

(nominally 30 ppm).

i. LDVs and LDT1s–LDT4s

Certainly, larger vehicles and trucks,

which are heavier and have larger

frontal areas, will face the biggest

challenges in meeting the final Tier 2

standards. However, conventional

technology will be sufficient for even

these vehicles, especially in light of the

extra leadtime we have provided before

LDT3s and LDT4s have to meet Tier 2

levels. We are also changing the test

conditions for these trucks from

‘‘adjusted loaded vehicle weight’’ to

‘‘loaded vehicle weight.’’ Adjusted

loaded vehicle weight, suitable for

commercial truck operation, loads the

truck to half of its full payload. Loaded

vehicle weight, on the other hand,

represents curb weight plus 300 pounds.

This change more accurately reflects

how these vehicles are used and makes

heavy LDT testing consistent with

passenger car and light LDT testing.

This change is consistent with treating

these vehicles as they were designed,

i.e., for light-load use.

Emission control technology has

evolved rapidly in recent years.

Emission standards applicable to 1990

model year vehicles required roughly 90

percent reductions in exhaust HC and

CO emissions and a 75 percent

reduction in NOX emissions compared

to uncontrolled emissions. Today, some

vehicles currently in production are

well below these levels, showing even

greater overall emissions reductions of

all three of these pollutants. These

vehicles’ emissions are well below those

necessary to meet the current federal

Tier 1 and even California LowEmission Vehicle (LEV–I) standards.

The reductions have been brought about

by ongoing improvements in engine airfuel management hardware and software

plus improvements in catalyst designs,

all of which are described fully in the

RIA.

The types of changes being seen on

current vehicles have not yet reached

their technological limits, and

continuing improvement will allow

both LDVs and LDTs to meet the final

standards. The RIA describes a range of

specific techniques that we believe

could be used. These range from

improved computer software and engine

air-fuel controls to increases in precious

metal loading and other exhaust system/

catalyst system improvements. All of

these technologies are currently used on

one or more production vehicle models.

There is no need to invent new

approaches or technologies. The focus

of the effort is primarily development,

Federal Register / Vol. 65, No. 28 / Thursday, February 10, 2000 / Rules and Regulations 6725

44Powertrain control modules are computers

used to control engine, transmission, and other

vehicle functions on newer automobiles and trucks.

The changes involved software changes in the case

of the EPA-NVFEL work, or the use of alternate

means of engine control in the case of the SwRI

work.

45Although this testing was done on vehicles

with catalysts aged to 50,000, we belive the overall

experiments also strongly suggest that the Tier 2

full-life standards would be achieved by highmileage vehicles.

application, and optimization of these

existing technologies.

We can gain significant insight into

the difficulty of meeting the final new

standards by looking at current full-life

certification data. There are at least 48

engine family-control systems

combinations, out of approximately 400,

certified in 1999 at levels below the Tier

2 NOX standard of 0.07 g/mi. Of these,

35 also have hydrocarbon levels of 0.09

g/mi or below. Looking at a somewhat

higher threshold to identify vehicles

certified near the final standard, there

are an additional 113 car and light truck

families certified at levels between 0.07

g/mi and 0.10 g/mi NOX. Although not

yet complete at this time, we also

examined the 2000 model year

certification data and found that there

are at least 60 engine family-control

systems combinations certified at levels

below the Tier 2 NOX standard of 0.07

g/mi and of those, 52 also have

hydrocarbon levels of 0.09 g/mi or

below.

All of the above vehicles are already

able, or close to being able, to certify to

our final standards. The further

reductions needed are those to provide

a compliance margin, or cushion,

between the certified level and the

emission standard. The degree of

compliance margin required is a

function of a variety of factors designed

to provide the manufacturer a high

confidence that production vehicles will

meet the standards in-use over their

useful life. Historically, these

determinations are manufacturer

specific, with cushions generally

growing smaller as standards decline

(reflecting more precision and

repeatability in vehicle performance as

more sophisticated controls are

developed). The certification data

reflects compliance cushions from as

little as 20 percent below the standard

to as high as 80 percent below the

standard.

The manufacturers commented that

the most difficult vehicles to bring into

compliance with the Tier 2 standards

would be the larger light-duty trucks,

specifically those trucks currently

certified under the LDT3 and LDT4

weight categories. Because of this, we

undertook a technology demonstration

program aimed at lowering the

emissions of several large 1999 lightduty trucks. Two LDT3 Chevrolet

Silverado pick-up trucks were tested,

one internally and one under contract.

Two LDT4 Ford Expedition sport-utility

vehicles were also tested, also with one

tested internally and one under

contract. Both types of vehicles were

tested with optional high horsepower

engines (270 hp for the Silverado and

230 hp for the Expedition) and were

equipped with four-wheel drive. The

vehicles had curb weights of 4,500

pounds (GVWR of 6,100 lbs) for the

Silverados and 5,800 pounds (GVWR of

7,200 lbs) for the Expeditions.

Figures IV.A.–1 and IV.A.–2 show the

results to date of the emissions tests

performed during this demonstration

program at our National Vehicle and

Fuel Emissions Laboratory (NVFEL) and

also for emissions tests conducted in

parallel by and under contract at

Southwest Research Institute (SwRI)

using similar Ford Expeditions and GM

Chevrolet Silverados. During the

evaluation, the trucks were equipped

with a variety of catalysts that typically

featured higher volume, higher precious

metal loading, and higher cell-densities

than the original hardware used by the

vehicles to meet California LEV–I

standards. Details of the catalysts tested

are included in the RIA. Different

exhaust manifolds featuring an

insulating air-gap and low thermal mass

were also evaluated. Finally, calibration

changes were made to the powertrain

control modules 44 to better match

engine operating characteristics to the

new catalyst systems, and to lower

engine-out NOx emissions. The

Silverado and Expedition had very

similar results. Similar results were also

achieved by us and SwRI, but by fairly

different methods. The SwRI work on

both trucks relied primarily on engine

calibration changes and secondary air

injection. The advanced catalyst

systems used by SwRI contained

advanced washcoat formulations with

only minor changes to catalyst volume

and precious metal content compared to

the manufacturer’s original

configuration. The work we conducted

on the Expedition also relied primarily

on engine calibration changes with no

secondary air injection. The catalyst

system also contained advanced

washcoat formulations with modest

changes to catalyst volume and precious

metal content. The work we conducted

on the Silverado relied primarily on an

advanced catalyst system with volume

and precious metal content changes,

with only minor changes to engine

calibration.

As can be seen in the charts, the

emissions of the vehicles tested clearly

show the feasibility of the Tier 2

standards on the most difficult to certify

vehicle categories. All vehicles reached

emission levels well below the Tier 2

full-life NOx and NMOG standards. At

the same time, there were no significant

impacts on either fuel economy or

performance of the vehicles.

Compared to the intermediate (50,000

mile) standards, the Ford Expedition

tested at NVFEL consistently emitted

NOx at less than one-third of the

intermediate useful life standard.45

NMHC/NMOG emissions were slightly

below the intermediate standard level

with no use of secondary-air-injection

for cold-start hydrocarbon control. The

Silverado tested at NVFEL met the

intermediate standards with primarily

hardware (catalyst) changes and only

very minor calibration changes. The

trucks tested at SwRI differed from

those tested at NVFEL in their

combination of emissions control

hardware and calibration strategies, but

achieved approximately the same

emissions levels.

The above results point out that not

only are the Tier 2 standards feasible for

larger trucks, but there are multiple

means that can be taken in order to

achieve the necessary emissions levels.

All of those paths involve fairly simple

enhancements to current technology

systems. Furthermore, the testing was

conducted with a very limited budget

over a limited amount of time. With the

interim program for heavy trucks under

Tier 2, the manufacturers will have 9

years from the publishing of the Tier 2

rule to bring the largest trucks into

compliance with the Tier 2 standards.

Manufacturers will also have

considerably more resources with

respect to calibration changes and

hardware design to bring trucks of this

type within compliance than were

available within this limited, but

successful, demonstration.

BILLING CODE 6560–50–P

6726 Federal Register / Vol. 65, No. 28 / Thursday, February 10, 2000 / Rules and Regulations

Federal Register / Vol. 65, No. 28 / Thursday, February 10, 2000 / Rules and Regulations 6727

BILLING CODE 6560–50–C

The Manufacturers of Emission

Controls Association (MECA) sponsored

a program that took two LDVs (a Crown

Victoria and a Buick LeSabre) and one

LDT2 (a Toyota T100) certified to the

federal Tier 1 standards and replaced

the original catalytic converter systems

with more advanced catalytic

converters, thermally aged to

approximately 50,000 miles. With these

systems and some related emission

control modifications, the LeSabre and

T100 emissions were well below our

intermediate (50,000 mile) useful life

standards, and the Crown Victoria was

well below the NMOG standard and

very close to the NOX standard.

Finally, the California Air Resources

Board (ARB) tested five different

production LEV light-duty vehicle

models. Three of the five models met

the Tier 2 standards for NMOG and NOX

prior to any modifications. After

installing low mileage advanced

catalytic converters and making some

minor adjustments to fuel bias, air

injection, and spark timing, all of the

vehicles had emission levels well below

the Tier 2 intermediate useful life

NMOG and NOX standards. ARB also

tested several Ford Expeditions (LDT4)

equipped with advanced catalytic

converters. By adjusting several

parameters, they were able to reduce

NOX emissions to 0.06 g/mi and NMOG

to 0.07 g/mi with a catalyst aged to

50,000 miles of use.

A more expanded analysis of the

feasibility of the Tier 2 standards for

gasoline fueled vehicles can be found in

the RIA, considering the types of

changes that will allow manufacturers

to extend effective new controls to the

entire fleet of affected vehicles. That

analysis includes discussion of gasoline

direct-injection engines, as well as the

feasibility of the CO, formaldehyde and

evaporative emission standards. The

conclusion of all of our analyses is that

the standards are feasible for gasolinefueled vehicles. As gasoline-fueled

vehicles represent the overwhelming

majority of the LDV and LDT population

(i.e., over 99%), EPA concludes that the

Tier 2 standards are feasible overall for

LDVs and LDTs under 8500 lbs GVWR.

ii. Medium-Duty Passenger Vehicles

(MDPVs)

The technologies and emission

control strategies that will be used for

LDT3 and LDT4 vehicles with a GVWR

less than 8,500 pounds should apply

directly to MDPV vehicles that have a

GVWR greater than 8,500 pounds. In our

LDT technology demonstration program

discussed above, we found that a

combination of calibration changes and

improvements to the catalyst system

resulted in emission levels for NOX well

below and NMHC/NMOG

approximately at the Tier 2 intermediate

useful life standards. The catalyst

improvements consisted of increases in

volume and precious metal loading, and

higher cell-densities than those found in

the original hardware. We are confident

that the use of secondary-air-injection

will greatly help cold-start hydrocarbon

control, making the NMOG standards

achievable.

The most significant difference

between LDT4s less than 8,500 pounds

GVWR and MDPVs greater than 8,500

pounds GVWR is that MDPVs have a

vehicle weight up to 800 pounds more

than LDT4s. MDPVs will also be

typically equipped with larger

displacement engines. The potential

impact of these differences is higher

engine-out emissions than LDT4s due to

the larger engine displacement and

6728 Federal Register / Vol. 65, No. 28 / Thursday, February 10, 2000 / Rules and Regulations

46 ‘‘Cummins Sees Diesel Feasible for Early Years

of Tier 2’’. Hart Diesel Fuel News, Sept. 20, 1999,

p.2. 47Harts Diesel Fuel News, August 9, 1999, p4.

greater load that the engine will be

operated under due to the extra weight.

However, neither of these preclude

manufacturers from applying the same

basic emission control technologies and

strategies as used by LDVs and LDTs.

The only difference will likely be the

need for larger catalysts with higher

precious metal loading than found in

LDT4s. We are confident that MDPVs

will be capable of meeting the final Tier

2 standards.

We are currently testing a Ford

Excursion as part of our LDT technology

demonstration program. Preliminary

baseline results with a ‘green’’ (i.e.,

nearly new) catalyst indicate that

emission levels are higher than baseline

emissions for the Ford Expedition.

These results, although with a green

catalyst, are well below our interim Tier

2 upper bin standards. In fact, the

majority of these vehicles certified on

the chassis dynamometer in California

have certification levels well below our

interim upper bin standards. While this

testing is ongoing, we feel that the

preliminary results are encouraging

since they suggest that the difference in

emissions between the Excursion and

Expedition suggest that the strategies

used on the Expedition can be

successful with the Excursion.

Therefore, we believe that by using

technologies and control strategies

similar to what will be used by LDVs

and LDTs, combined with larger

catalysts, MDPVs will be able to meet

our Tier 2 emission standards.

b. Diesel Vehicles

As discussed above, the Tier 2

standards are intended to be ‘‘fuel

neutral.’’ In today’s document, we

establish that the Tier 2 standards are

technologically feasible and costeffective for LDVs and LDTs overall,

based on the discussion in Section

IV.A.1.a. above. Under the principle of

fuel neutrality, all cars and light trucks,

including those using diesel engines,

will be required to meet the Tier 2

standards. Contrary to some of the

comments received on our proposal,

given that the overwhelming majority of

vehicles in these classes are gasolinefueled, we do not believe it is

appropriate to provide less stringent

standards for diesel-fueled vehicles.

Manufacturers of LDVs and LDTs today

provide consumers with a wide choice

of vehicles that are overwhelmingly

gasoline-fueled. Less stringent standards

for diesels would create provisions that

could undermine the emission

reductions expected from this program,

especially given the expectation that

some manufacturers may intend to

greatly increase their diesel sales.

As with gasoline engines,

manufacturers of diesels have made

abundant progress over the past 10 years

in reducing engine-out emissions from

diesel engines. In heavy trucks and

buses, PM emission standards, which

were projected to require the use of

exhaust aftertreatment devices, were

actually met with only engine

modifications. Indeed, emissions and

performance of lighter diesel engine are

rapidly approaching the characteristics

of gasoline engines, while retaining the

durability and fuel economy advantages

that diesels enjoy. Against this

background of continuing progress, we

believe that the technological

improvements that would be needed

could be made in the time that would

be available before diesels would have

to meet the new Tier 2 standards.

Manufacturers may take advantage of

the flexibilities in today’s rulemaking to

delay the need for diesel LDVs and

LDTs to meet the final Tier 2 levels until

late in the phase-in period (as late as

2007 for LDVs/LLDTs and 2009 for

HLDTs), giving manufacturers a

relatively large amount of leadtime. In a

recent public statement, Cummins

Engine Company has indicated that the

interim Tier 2 standards in effect for

vehicles and trucks in the early years of

the Tier 2 program are feasible for diesel

equipped models through further

development of currently available

engine and exhaust aftertreatment

technology.46

While reductions in ‘‘engine-out’’

emissions, including incorporation of

EGR strategies, may continue to be

made, increasing emphasis is being

placed on various aftertreatment devices

for diesels. We believe that the use of

aftertreatment devices will allow diesels

to comply with the Tier 2 standards for

NOX and PM.

For NOX emissions, potential

aftertreatment technologies include lean

NOX catalysts, NOX adsorbers and

selective catalytic reduction (SCR). Lean

NOX catalysts are still under

development, but generally appear

capable of reducing NOX emissions by

about 15–30%. This efficiency is not

likely to be sufficient to enable

compliance with the final Tier 2

standards, but it could be used to meet

the interim standards that would begin

in 2004, with current diesel fuel.

NOX adsorbers appear capable of

reaching efficiency levels as high as

90%. Efficiency in this range is likely to

be sufficient to enable compliance with

the proposed Tier 2 standards. NOX

adsorbers temporarily store the NOX and

thus the engine must be run periodically

for a brief time with excess fuel, so that

the stored NOX can be released and

converted to nitrogen and oxygen using

a conventional three-way catalyst, like

that used on current gasoline vehicles.

There is currently a substantial

amount of development work being

directed at NOX adsorber technology.

While there are technical hurdles to be

overcome, progress is continuing and it

is our judgement that the technology

should be available by the time it would

be needed for the final Tier 2 standards.

One serious concern with current

NOX adsorbers is that they are quickly

poisoned by sulfur in the fuel. Some

manufacturers have strongly

emphasized their belief that, in order to

meet the final Tier 2 levels, low sulfur

diesel fuel would also be required to

mitigate or prevent this poisoning

problem. In its comments on the NPRM,

Navistar indicated that the Tier 2

standards may be achievable given low

sulfur fuel and other programmatic

changes such as those included in this

Final Rule. Navistar has also been

quoted publically as describing the Tier

2 standards as ‘‘challenging but

achievable’’ given appropriate low

sulfur fuel.47 We intend to issue a

Notice of Proposed Rulemaking early in

the year 2000 intended to reduce sulfur

in highway diesel fuel as a step to

enable the technology most likely to be

used to meet the Tier 2 standards.

SCR has been demonstrated

commercially on stationary diesel

engines and can reduce NOX emissions

by 80–90%. This efficiency would be

sufficient to enable compliance with the

proposed Tier 2 standards. However,

SCR requires that the chemical urea be

injected into the exhaust before the

catalyst to assist in the destruction of

NOX. The urea must be injected at very

precise rates, which is difficult to

achieve with an on-highway engine,

because of widely varying engine

operating conditions. Otherwise,

emissions of ammonia, which have a

very objectionable odor, can occur.

Substantial amounts of urea are

required, meaning that vehicle owners

would have to replenish their vehicles’

supply of urea frequently, possibly as

often as every fill-up of fuel. As the

engine and vehicle would operate

satisfactorily without the urea (only

NOX emissions would be affected), some

mechanism would be needed to ensure

that vehicle owners maintained their

supply of urea. Otherwise, little NOX

emission reduction would be expected

in-use.

Federal Register / Vol. 65, No. 28 / Thursday, February 10, 2000 / Rules and Regulations 6729

48The air quality impacts discussed above under

Section III above do not reflect these new estimates.

Regarding PM, applicable

aftertreatment devices tend to fall into

two categories: Oxidation catalysts and

traps. Diesel oxidation catalysts can

reduce total PM emissions by roughly

15–30%. They would need to be used in

conjunction with further reductions in

PM engine-out emissions in order to

meet the proposed Tier 2 standards.

Diesel particulate traps, on the other

hand, can eliminate up to 90% of diesel

PM emissions. However, some of the

means of accomplishing the

regeneration of particulate traps involve

catalytic processes that also convert

sulfur dioxide in the exhaust to sulfate.

These techniques, if used, would also

require a low sulfur fuel.

In summary, we believe that the

structure of our final program, including

the available bins and phase-in periods,

will allow the orderly development of

clean diesel engine technologies. We

believe that the interim standards are

feasible for diesel LDV/LDTs, within the

bin structure of this rule and without

further reductions in diesel fuel sulfur

levels. And, as indicated earlier, at least

one major diesel engine manufacturer

(Cummins) has publicly agreed with

this assessment. We further believe that

in the long-term, the final standards will

be within reach for diesel-fueled

vehicles in combination with

appropriate changes to diesel fuel to

facilitate aftertreatment technologies.

Manufacturers have argued that low

sulfur diesel fuel will be required to

permit diesels to meet the final Tier 2

standards, and we agree. At least one

major manufacturer (Navistar) has

indicated its belief that the final Tier 2

standards may be achievable for diesel

engines with low sulfur diesel fuel.

2. Gasoline Sulfur Control Is Needed to

Support the Proposed Vehicle Standards

As we discussed in the previous

section, we believe that the stringent

standards in this final rule are needed

to meet air quality goals and are feasible

for LDVs and LDTs. At the same time,

we believe that for these standards to be

feasible for gasoline LDVs and LDTs,

low sulfur gasoline must be made

available. The following paragraphs

explain why we think gasoline sulfur

control must accompany Tier 2 vehicle

standards.

Catalyst manufacturers generally use

low sulfur gasoline in the development

of their catalyst designs. Vehicle

manufacturers then equip their vehicles

with these catalysts and EPA certifies

them to the exhaust emission standards,

usually based on testing the

manufacturer does using low sulfur

gasoline. However, fundamental

chemical and physical characteristics of

exhaust catalytic converter technology

generally result in a significant

degradation of emission performance

when these vehicles use gasoline with

sulfur levels common in most of the

country today. This sensitivity of

catalytic converters to gasoline sulfur

varies somewhat depending on a

number of factors, some better

understood than others. Clearly,

however, as we discuss in the following

paragraphs, gasoline sulfur’s impact is

large, especially in vehicles designed to

meet very low emission standards.

This is the reason EPA has decided to

adopt a comprehensive approach to

addressing emissions from cars and

light trucks, including provisions to get

low sulfur gasoline into the field in the

same time frame needed for Tier 2

vehicles.

a. How Does Gasoline Sulfur Affect

Vehicle Emission Performance?

We know that gasoline sulfur has a

negative impact on vehicle emission

controls. Vehicles depend on the

catalytic converter to reduce emissions

of HC, CO, and NOX. Sulfur and sulfur

compounds attach or ‘‘adsorb’’ to the

precious metal catalysts that are

required to convert these emissions.

Sulfur also blocks sites on the catalyst

designed to store oxygen that are

necessary to optimize NOX emissions

conversions. While the amount of sulfur

contamination can vary depending on

the metals used in the catalyst and other

aspects of the design and operation of

the vehicle, some level of sulfur

contamination will occur in any

catalyst.

Sulfur sensitivity is impacted not only

by the catalyst formulation (the types

and amounts of precious metals used in

the catalyst) but also by factors

including the following:

• The materials used to provide

oxygen storage capacity in the catalyst,

as well as the general design of the

catalyst,

• The location of the catalyst relative

to the engine, which impacts the

temperatures inside the catalyst,

• The mix of air and fuel entering the

engine over the course of operation,

which is varied by the engine’s

computer in response to the driving

situation and affects the mix of gases

entering the catalyst from the engine,

and

• The speeds the car is driven at and

the load the vehicle is carrying, which

also impact the temperatures

experienced by the catalyst.

Since these factors vary for every

vehicle, the sulfur impact varies for

every vehicle to some degree. There is

no single factor that guarantees that a

vehicle will be very sensitive or very

insensitive to sulfur. We now believe

that there are not (and will not be in the

foreseeable future) emission control

devices available for gasoline-powered

vehicles that can meet the proposed Tier

2 emission standards that would not be

significantly impaired by gasoline with

sulfur levels common today.

b. How Large Is Gasoline Sulfur’s Effect

on Emissions?

High sulfur levels have been shown to

significantly impair the emission

control systems of cleaner, later

technology vehicles. The California LEV

standards and Federal NLEV standards,

as well as California’s new LEV–II

standards and our Tier 2 standards,

require catalysts to be extremely

efficient to adequately reduce emissions

over the full useful life of the vehicle.

In the NPRM we estimated that, based

on data from test programs conducted

by EPA and the automotive and oil

industries, LEV and ULEV vehicles

could experience, on average, a 40

percent increase in NMHC and 134

percent increase in NOX emissions

when operated on 330 ppm sulfur fuel

(our estimate in the NPRM of the

current national average sulfur level)

compared to 30 ppm sulfur fuel. New

data generated since the NPRM on

similar LEVs and ULEVs show that

when these vehicles were driven on

high sulfur (330 ppm) fuel for a few

thousand miles (as opposed to less than

100 miles for the previous data), the

NMHC and NOX emission increase due

to high sulfur fuel increased by 149

percent and 47 percent, respectively. In

other words, instead of the previous

estimated 40 percent and 134 percent

increases in NMHC and NOX emissions,

respectively, more realistic estimates

would be 100 percent and 197 percent,

respectively.48 Also, new data generated

since the NPRM for late model LEV and

ULEV vehicles that meet the federal and

California supplemental federal test

procedure (SFTP) standards and also

have very low FTP emission levels,

indicate that, on average, a 51 percent

increase in NMHC and a 242 percent

increase in NOX emissions when

operated for a short period of time on

330 ppm compared to 30 ppm could be

realized.

This level of emissions increase is

significant enough on its own to cause

a vehicle to exceed the full useful life

emission standards when operated on

sulfur levels that are substantially

higher than the levels required by

today’s rule, even with the margin of

6730 Federal Register / Vol. 65, No. 28 / Thursday, February 10, 2000 / Rules and Regulations

safety that auto manufacturers generally

include. Average sulfur levels in the

U.S. are currently high enough to

significantly impair the emissions

control systems in new technology

vehicles, and to potentially cause these

vehicles to fail emission standards

required for vehicles up through

100,000 miles (or more) of operation.

For older vehicles designed to meet

Tier 0 and Tier 1 emission standards,

the effect of sulfur contamination is

somewhat less. Still, testing shows that

gasoline sulfur increases emissions of

NMHC and NOX by almost 17% when

one of these vehicles is operated on

gasoline for less than 100 miles

containing 330 ppm sulfur compared to

operation on gasoline with 30 ppm

sulfur. Thus, Tier 0 and Tier 1 vehicles

can also have higher emissions when

they are exposed to sulfur levels

substantially higher than the proposed

sulfur standard. This increase is

generally not enough to cause a vehicle

to exceed the full useful life emission

standards in practice, but it can result

in in-use emissions increases since the

vehicle could emit at levels higher than

it would if it operated consistently on

30 ppm sulfur gasoline.

As discussed in the RIA, NLEV and

Tier 2 vehicles are significantly more

sensitive to sulfur poisoning than Tier 1

and Tier 0 vehicles. Because of this,

even in the absence of Tier 2 standards,

gasoline sulfur control to 30 ppm would

achieve about 700,000 tons of NOX

reductions per year from LDVs and

LDTs by 2020. This represents about a

third of the national NOX emission

reductions otherwise available from

these vehicles. Without these potential

emission reductions, many states would

face the potentially unmeetable

challenge of finding enough other costeffective sources of NOX emission

reductions to address their ozone

nonattainment and maintenance

problems.

Sulfur reductions will result in

reductions of other pollutants as well.

For example, the increase in CO

emissions at 330 ppm compared to 30

ppm were very similar to the results

above for NMHC. Thus, sulfur

reductions would greatly reduce CO

emissions. Another example is sulfur

reductions will help reduce emissions

of particulate matter, providing some

benefit to PM nonattainment areas

(which may or may not coincide with

ozone nonattainment areas) as well as

with visibility problems. Sulfur

reductions will also have benefits for

areas across the country with acid

deposition problems. Furthermore,

sulfur reduction, by enabling tighter

Tier 2 standards and by improving

emissions performance of the vehicles

already on the road, will lead to fewer

NMOG emissions, since, as explained in

the RIA, NMOG emissions are also

impacted by gasoline sulfur (although to

a lesser extent than NOX emissions).

Some of the NMOG emissions reduced

are air toxics. As described in Section III

above, air toxics, also known as

hazardous air pollutants, or HAPs,

contribute to a variety of human health

problems.

c. Sulfur’s Negative Impact on Tier 2

Catalysts

As we discussed in the last section,

sulfur contaminates the catalyst. In

addition, essentially all vehicles that

have been tested show that this effect is

not reversible for one or more

pollutants. The ability to reverse sulfur’s

negative effect on catalyst performance

is dependent on a number of factors.

The same factors that impact sulfur

sensitivity also impact the irreversibility

of the sulfur effect. For example, the

location of the catalyst relative to the

engine, the materials used to provide

oxygen storage capacity in the catalyst,

and the general design of the catalyst

and the mix of air and fuel (A/F)

entering the engine over the course of

operation affect irreversibility, to name

a few.

Perhaps the most significant factors

for reversibility are the mixture of air

and fuel entering the engine and catalyst

temperature. The results of numerous

studies and test programs show that rich

exhaust (absence of oxygen) mixtures in

addition to high catalyst temperatures

(in excess of 700°C) can remove sulfur

from the catalyst. Rich exhaust mixtures

can occur intentionally and

unintentionally, depending on the level

of sophistication of the fuel control

system. An intentional rich exhaust

mixture is known as fuel ‘‘enrichment.’’

There are different types of enrichment.

For example, there is ‘‘commanded’’

enrichment, which is used to provide

extra power when the engine is under

a load (e.g., accelerations), as well as a

means to cool the catalyst. Also, there

is enrichment which results from the

normal fluctuations in A/F that occur

during typical ‘‘closed-loop’’ FTP

operating conditions. The amount of

enrichment necessary for sulfur removal

is a function of several factors: the

‘‘magnitude’’ of the enrichment event,

the duration of the enrichment event,

and the frequency of which the

enrichment event occurs.

While the amount of fuel enrichment

is critical in the removal of sulfur from

the catalyst, high catalyst temperature is

equally as important. In order to meet

strict Tier 2 standards, manufacturers

are going to have to balance tight A/F

control with improved catalyst

performance, with an eye towards better

catalyst thermal management. Many

manufacturers are going to have to

depend more on the precious metal

palladium for oxidation of NMOG and

CO emissions, as well as the reduction

of NOX, because palladium is more

tolerant to high temperatures. Since the

vast majority of emissions still occur

immediately following a cold start when

the catalyst is still cool, further

reductions to cold start emissions can be

achieved by locating the catalysts very

close to the engine. The closer

proximity to the engine helps to activate

the catalyst sooner by taking advantage

of the additional heat supplied to the

catalyst by the exhaust manifolds.

Palladium is very sensitive to sulfur

and, consequentially, catalyst systems

that rely heavily on this metal tend to

be more sensitive to sulfur and less

reversible. The precious metal platinum,

although usually a little more effective

at oxidizing NMOG and CO and slightly

less sensitive to sulfur than palladium,

is too sensitive to high temperature to

survive the close proximity to the

engine and is not anticipated to be used

for close-coupled applications.

As discussed above, manufacturers

will need to make modifications to their

emission system calibrations by

optimizing fuel control, spark timing,

EGR and other parameters in

conjunction with improvements to

catalyst systems, in order to meet Tier

2 emission standards. This combination

of emission control strategies can result

in significant trade-offs between NMOG

and NOX control. There can be

considerable uncertainty associated

with balancing these trade-offs at very

low emissions levels if the vehicle is

periodically operated on high sulfur

fuels.

Our federal supplemental federal test

procedure (SFTP) standards, as well as

California’s SFTP standards, both of

which take effect in the 2001 model

year, can further exacerbate this

problem. The SFTP standards are

intended to better address and control

emissions under driving conditions not

captured when compliance with our

FTP-based exhaust emissions standards

is demonstrated, such as operation with

the air conditioning turned on or

driving at very high rates of acceleration

and vehicle speeds (hereafter referred to

simply as aggressive driving). This is an

important factor in assessing sulfur

irreversibility, because Tier 2 vehicles

will have to meet more stringent

exhaust emission standards and will

have to meet these standards over the

wider variety of operating conditions

Federal Register / Vol. 65, No. 28 / Thursday, February 10, 2000 / Rules and Regulations 6731

49The FTP (Federal Test Procedure) is the basic

driving cycle used for federal emissions testing; the

LA4 cycle is a component of the FTP. The REP05

cycle developed by EPA is representative of all

driving that occurs outside the LA4 or FTP cycle.

All but one of the aggressive accelerations found in

the US06 cycle were taken from the REP05. While

each segment of the US06 cycle was taken from

actual in-use driving, the timing and combination

of these segments is not representative of in-use

driving in the way REP05 is representative.

included in the SFTP provisions. Hence,

they will have to be designed to meet

the emission standards under all such

operating conditions; these design

changes may influence how irreversible

the sulfur effect will be, as explained

below.

Since wide variations in the A/F ratio

help to remove sulfur from the catalytic

surface, there is concern that vehicles

which meet the SFTP standards, when

driven aggressively, will experience

insufficient enrichment to purge sulfur

from the catalyst. Currently, when

driven aggressively, the A/F ratio for

most vehicles (those not certified to

SFTP standards) is quite variable.

Meeting the SFTP standards will ensure

that manufacturers carefully control the

A/F ratio over essentially all in-use

driving conditions. This absence of

widely varying A/F could therefore

inhibit the removal of sulfur from the

catalyst once operation on high sulfur

fuel ceased.

In order to quantify how irreversible

the sulfur effect would be when

catalysts exposed to high sulfur fuel are

then exposed to lower sulfur fuel,

several test programs were developed by

EPA and industry. The vehicles in these

test programs consisted of LDVs and

LDTs that met either EPA Tier 1 or

California LEV and ULEV emission

standards. All of the vehicles were first

tested at a low sulfur level (e.g., 30 or

40 ppm) to establish a baseline. The

vehicles were then re-tested with high

sulfur fuel (e.g., 350 to 540 ppm). After

emission results had stabilized, the

vehicles were again re-tested with low

sulfur fuel. Prior to each of the second

series of low sulfur tests, the vehicles

were operated over a short driving cycle

to help purge (i.e., remove) sulfur from

the catalyst. Two different cycles were

used to purge sulfur, representing

different types of driving: moderate

urban conditions and aggressive

conditions. The FTP cycle, which

represents moderate urban driving, and

the REP05 49 cycle, which represents

very aggressive driving (e.g., hard

accelerations, high speed cruises), were

the two cycles used.

The vehicles tested exhibited a wide

range of irreversibility, for reasons that

are not fully understood. The data

published in the NPRM, showed that

the effect of operation on high sulfur

fuel was irreversible on one or more

pollutants after operation on low sulfur

fuel. NOX emissions were 15 percent

irreversible. None of the vehicles were

designed or modified to meet either the

California or federal SFTP emissions

standards. The only data used in an

attempt to quantify the effect of

aggressive operation on sulfur

reversibility was from a catalyst

manufacturer that performed some

vehicle testing with catalysts which

were bench aged with low and high

sulfur fuel that appeared to closely

approximate the impact aggressive

operation would have on sulfur

irreversibility. It was this data on which

we based our projection of sulfur

irreversibility for Tier 2 vehicles at 50

percent for NMHC and NOX emissions.

Subsequent comments on the validity of

these estimates after the publishing of

the NPRM prompted several additional

test programs on sulfur irreversibility.

The sulfur irreversibility test

programs that followed the NPRM

focused on vehicles that had emission

levels that met or were close to Tier 2

emission standards and also met the

US06 or aggressive driving portion of

the SFTP emission standards. Although

numerous vehicles were tested, only

four met both of the above criteria. (We

had tried to supplement the data base,

but we were only able to add a limited

number of vehicles.) We also decided to

quantify irreversibility for NMHC and

NOX emissions together instead of

independently, because per our

discussion above, sensitivity and

irreversibility of either pollutant

appears to be very dependent on the

particular strategy chosen to reduce

these emissions (particularly engine

calibration and catalyst loading of

precious metals and oxygen storage).

The new data exhibited a range of

variability among vehicles and

pollutants, similar to the data presented

in the NPRM. The most important

distinction between the new FRM data

and the old NPRM data was that the

new data showed that, on average,

NMHC+NOX emissions in three out of

four vehicles were not fully reversible

after aggressive driving. Based on this

data, we project that NMHC+NOX

emissions will be 20 to 65 percent

irreversible for Tier 2 vehicles under

typical in-use driving, including

aggressive driving.

As discussed above, the combination

of calibration changes and emission

system hardware modifications needed

to meet our stringent Tier 2 emissions

standards, can result in significant

trade-offs between NMHC/NMOG and

NOX control. There can be considerable

uncertainty associated with balancing

these trade-offs at very low emissions

levels if the vehicle is periodically

operated on high sulfur fuels, making

the ability to remove sulfur from the

catalyst highly uncertain. For example,

a given catalyst today may be fully

reversible for one pollutant and only

partially reversible for another.

However, because of the trade-off in

NMOG and NOX performance, the

modifications necessary to get that

vehicle to meet both emission standards

may result in the opposite effect for

reversibility; i.e., full reversibility for

NMOG and partial reversibility for NOX.

There is no technical certainty that both

the NMOG and NOX emission standards

can be met without compromising

reversibility performance. Therefore, we

continue to believe that sulfur’s negative

impact on Tier 2 catalysts is a

substantial concern.

The preceding discussion focused on

the irreversibility of the sulfur impact

on emissions from current gasoline

engine technologies. There are new

technologies under development, which

could be sold in the U.S. in the middle

of the next decade (the same time that

Tier 2 vehicles are being introduced),

which also appear to be very sensitive

to sulfur and largely unable to reverse

this sulfur impact. One of these

technologies is the direct injection

gasoline (GDI) engine. These engines

utilize much more air than is needed to

burn the fuel, unlike conventional

gasoline engines that operate under

conditions where only just enough air to

completely burn the fuel is introduced

into the engine. This GDI technology

allows these engines to be up to 25%

more fuel efficient than current gasoline

engines and to emit up to 20% less

carbon dioxide. GDI engines are

currently being introduced in both

Japan and Europe (which have or will

soon require low sulfur gasolines).

Because of the significant operating

differences with GDI engines, these

vehicles will likely require emission

control technology substantially

different from that used on conventional

gasoline engines. For example, a GDI

engine may require a NOX adsorber to

meet the proposed Tier 2 NOX standard.

High fuel sulfur levels quickly and

permanently degrade the performance of

these NOX adsorbers. Thus, to enable

the sale of advanced, high efficiency

GDI engines in the U.S. under the Tier

2 standards, it appears that low sulfur

gasoline would have to be available

nationwide by the time this technology

becomes available.

The fuel cell is another promising

propulsion system that is being

developed for possible introduction to

6732 Federal Register / Vol. 65, No. 28 / Thursday, February 10, 2000 / Rules and Regulations

50U.S. EPA, ‘‘OBD & Sulfur Status Report:

Sulfur’s Effect on the OBD Catalyst Monitor on Low

Emission Vehicles,’’ March 1997, updated

September 1997.

51 In this section and also in section V, we make

various references to the Tier 2 program, the interim

program (or standards) and the final Tier 2

standards. The Tier 2 program includes the interim

program (or standards) and the final Tier 2

standards. Some discussion is applicable to the

entire Tier 2 program, some to the interim program

(or standards) only and some is only applicable to

the final Tier 2 standards. As the program is

complex, we advise you to read carefully to discern

the applicability of the text to the proper model

years and categories of vehicles.

consumers early in the next century.

Fuel cells are being designed to operate

on a variety of fuels, including gasoline

and diesel fuel. The basic fuel cell

technology is highly sensitive to sulfur.

Almost any level of sulfur in the fuel

will disable the fuel cell. One possible

solution is to install a technology that

essentially filters out the sulfur before it

enters the fuel cell. However, such

sulfur ‘‘guards’’ are costly and could not

practically be used like a disposable

filter (requiring the vehicle owner to

change the sulfur guard frequently,

much like changing an oil filter) in

situations where constant exposure to

high sulfur levels occurs. (Even

exposure to relatively low sulfur levels

will likely require periodic replacement

of the sulfur guard to ensure adequate

protection for the fuel cell.) Therefore,

the amount of sulfur in the fuel must be

limited to that which can be removed by

one or at most two sulfur guards over

the life of the vehicle. Thus, in order for

fuel cells operating on gasoline to be

feasible in the U.S., low sulfur fuels

would have to be available nationwide

by the time this technology becomes

available.

d. Sulfur Has Negative Impacts on OBD

Systems

As discussed in more detail in the

RIA, EPA believes that sulfur in gasoline

can adversely impact the onboard

diagnostic (OBD) systems of current

vehicles as well as vehicles meeting the

Tier 2 standards. This is an important

factor supporting the need for a national

sulfur control program. EPA’s onboard

diagnostics (OBD) regulations require

that all vehicles be equipped with a

system that monitors, among other

things, the performance of the catalyst

and warns the owner if the catalyst is

not functioning properly. The OBD

catalyst monitor is designed to identify

those catalysts with pollutant

conversion efficiencies that have been

reduced to the extent that tailpipe

emissions would exceed a specified

multiple of the applicable hydrocarbon

emissions standard. For California LEV

and federal NLEV vehicles, that

multiple is 1.75 times the applicable

hydrocarbon emissions standard; for

federal Tier 1 vehicles, that multiple is

1.5 times the applicable hydrocarbon

standard added to the 4,000 mile

emission level.

We want to ensure that OBD systems

operate correctly, and thus the

possibility that gasoline sulfur may

interfere with these systems was another

consideration when evaluating the need

for a national sulfur program. Our

evaluation of sulfur’s effect on OBD

systems was summarized in a staff

paper in 1997.50 We concluded that

sulfur can affect the decisions made by

the OBD systems. Sulfur appears to

affect the oxygen sensor downstream of

the catalyst, which is used in the OBD

systems, and it is not clear that the

conditions that seem to reverse sulfur’s

effect on the catalyst will also reverse

any sulfur impact on the downstream

oxygen sensors. Indirectly, sulfur

impacts OBD systems because it can

impair a catalyst that would otherwise

be operating satisfactorily, thereby

triggering the OBD warning lights.

While this would indicate a properly

operating OBD system, auto

manufacturers have expressed the

concern that consumers using high

sulfur fuel may experience OBD

warnings much more frequently than

they would if operating on low sulfur

gasoline, and that this could lead to a

loss of consumer confidence in or

support for OBD systems. Consumers

may then ignore the OBD warning

system and drive a potentially high

emitting vehicle (which may have

nothing to do with exposure to sulfur),

contributing even more to air quality

problems. Another possible scenario is

that the OBD system may be impaired

by sulfur in such a way that it does not

register an improperly functioning

catalyst, even if the catalyst is impaired

for reasons unrelated to exposure to

sulfur. This would defeat the purpose of

OBD systems.

The reduction of sulfur levels for

gasoline should resolve any concerns

over the ability of the OBD system to

make proper decisions. The use of low

sulfur fuel should ensure that the OBD

warning light goes on when it is

supposed to and is not influenced by

sulfur contamination of the catalyst

and/or OBD system.

B. Our Program for Vehicles

The program we are establishing

today for cars, light trucks, and large

passenger vehicles will achieve the

same large NOX reductions that we

projected for the proposed program. The

program is very similar to our proposed

program in all major respects. We have

been able to retain the general structure,

stringency, and emissions benefits of the

proposal in this final rule. Where we

have made adjustments to the proposed

program, we have done so in ways that

improve the implementation of the

program without changing the overall

environmental benefits that the program

will achieve. And by creating a new

category of vehicles subject to the Tier

2 standards, medium-duty passenger

vehicles, the final rule will ensure that

all passenger vehicles expected to be on

the road in the foreseeable future will be

very clean.

We have seriously considered the

input of all stakeholders in developing

our final rule and believe the program

finalized below balances the concerns of

all stakeholders while achieving the

needed air quality benefits. In general,

the adjustments we have made are

aimed at improving the implementation

efficiency of the program by better

aligning the federal Tier 2 program with

the NLEV program and with California’s

program especially during the interim

program. 51 Extensive comments from

manufacturers led us to conclude that

better harmony between the two

programs would reduce the engineering,

testing and certification workload

related to our interim program. Where

we could make changes to increase the

overlap of the two programs while

maintaining the NOX reductions of the

proposal, we have done so. These

changes are discussed in detail in this

section IV.B. and in sections V.A. and

V.B.

Our final rule also includes

provisions to regulate complete heavyduty passenger vehicles (primarily

SUVs and passenger vans) of less than

10,000 pounds GVWR within the Tier 2

program. Standards for these vehicles

were not included in the Tier 2 NPRM,

but were proposed in a subsequent

NPRM on October 29, 1999 (64 FR

58472). The final provisions for these

vehicles are addressed in section

IV.B.4.g. These heavier vehicles have

been recategorized as medium duty

passenger vehicles (MDPVs). They are

included in the Tier 2 program starting

with model year 2004 and will be

treated similarly to HLDTs, unless

otherwise noted.

The next sections of the preamble

describe our final program in detail and

include changes and adjustments from

the NPRM that we believe address many

concerns raised by the Alliance and

others. While these changes ease the

burden on manufacturers, they have

little or no impact on the air quality

benefits of the Tier 2 program.

Federal Register / Vol. 65, No. 28 / Thursday, February 10, 2000 / Rules and Regulations 6733

52The NLEV program is a voluntary program,

adopted by all major LDV and LDT manufacturers.

It applies only to LDVs, LDT1s and LDT2s. It does

not apply to HLDTs.

53Throughout this text, the term ‘‘full life’’ is

used in reference to vehicle standards to mean ‘‘full

useful life’’ which is currently 10 years/100,000

miles for LDVs and LLDTs, but 11 years/120,000

miles for HLDTs. Similarly, ‘‘intermediate life’’

refers to intermediate useful life standards which

apply for the period of 5 years/50,000 miles. In this

rulemaking we are retaining the current full useful

life period for interim LDVs and LLDTs, but raising

it for Tier 2 vehicles to 10 years/120,000 miles.

In a number of places in the following

text, we mention that changes are being

made ‘‘in response to comments’’. For a

full summary of the comments and for

our responses to those comments, we

refer you to the Response to Comments

document contained in the docket for

this rulemaking or available from the

Office of Mobile Sources web site (see

web address at the beginning of this

document).

1. Overview of the Vehicle Program

The vehicle-related part of today’s

final rule covers a wide range of

standards, concepts, and provisions that

affect how vehicle manufacturers will

develop, certify, produce, and market

Tier 2 vehicles. This Overview

subsection provides readers with a

broad summary of the major vehiclerelated aspects of the rule. Readers for

whom this Overview is sufficient may

want to move on to the discussion of the

key gasoline sulfur control provisions

(Section IV.C.). Readers wishing a more

detailed understanding of the vehicle

provisions can continue beyond the

Overview to deeper discussions of key

issues and provisions (Sections IV.B.–2,

3, and 4) as well as discussions of

additional provisions (Section V.A.).

Readers should refer to the regulatory

language found at the end of this

preamble for a complete compilation of

the requirements.

To understand how the program will

work, it is useful to review EPA’s

classification system for light-duty

vehicles and trucks. The light-duty

category of motor vehicles includes all

vehicles and trucks at or below 8500

pounds gross vehicle weight rating, or

GVWR (i.e., vehicle weight plus rated

cargo capacity). Table IV.B.–1 shows the

various light-duty categories and also

shows our new medium-duty passenger

vehicle (MDPV) category, discussed in

section IV.B.4.g.. In the discussion

below, we make frequent reference to

two separate groups of light vehicles: (1)

LDV/LLDTs, which include all LDVs

and all LDT1s and LDT2s; and (2)

HLDTs, which include LDT3s and

LDT4s. We also make mention of

MDPVs although the details of our

program for those vehicles are deferred

to IV.B.4.g. at the end of section IV.B.

TABLE IV.B.—1 LIGHT-DUTY VEHICLES

AND TRUCKS AND MEDIUM-DUTY

PASSENGER VEHICLES; CATEGORY

CHARACTERISTICS

Characteristics

LDV .................... A passenger car or passenger car derivative

seating 12 passengers

or less.

Light LDT (LLDT) Any LDT rated at up

through 6,000 lbs

GVWR. Includes LDT1

and LDT2.

Heavy LDT

(HLDT).

Any LDT rated at greater

than 6,000 lbs GVWR.

Includes LDT3 and

LDT4s.

MDPV ................. A heavy-duty passenger

vehicle rated at less

than 10,000 lbs GVWR.

(The inclusion of

MDPVs is discussed

primarily in Section

IV.B.4.g.)

a. Introduction

Today’s final rule incorporates

concepts from the federal NLEV

program which began phase-in in the

1999 model year for LDV/LLDTs.52 The

program in today’s rule takes the

corporate averaging concept and other

provisions from NLEV but changes the

focus from NMOG to NOX and applies

them to all LDVs and LDTs. The final

rule is compatible with the California

LEV II (CalLEV II) program scheduled to

take effect in 2004. The emission

standard ‘‘bins’’ used for this average

calculation are different in several

respects from those of the CalLEV II

program, yet still allow harmonization

of federal and California vehicle

technology.

The Tier 2 corporate average NOX

level to be met through these

requirements ultimately applies to all of

a manufacturer’s LDVs and LDTs

(subject to two different phase-in

schedules) regardless of the fuel used.

Meanwhile, until the final Tier 2

standards are completely phased in,

separate interim standards apply to

LDV/LLDTs and HLDTs.

As proposed in the NPRM and

finalized in today’s document, the Tier

2 program will take effect in 2004, with

full phase in occurring by 2007 for LDV/

LLDTs and 2009 for HLDTs. During the

phase-in years of 2004–2008, vehicles

not certified to Tier 2 requirements will

meet interim requirements also using a

bins system, but with less stringent

corporate average NOX standards.

In the discussions below, we set forth

different Tier 2 phase-in schedules for

the two different groups of vehicles

(LDV/LLDTs and HLDTs) as well as two

different interim fleet average NOX

standards for 2004 and later model year

vehicles awaiting phase-in to the Tier 2

standards.

In the NPRM, we set forth separate

tables of full life standard bins for the

interim programs and the final Tier 2

program, but we proposed that

manufacturers could use all bins for

interim or Tier 2 vehicles during the

phase-in years.53 We also proposed

similar sets of tables for intermediate

life standards. In this final rule, for

simplicity and to accommodate

additional bins, including some

suggested by the Alliance, we have

combined all of the full life bins into

one table and all of the intermediate life

bins into one table. The bins system and

the choice of the individual bins is

discussed in detail below.

References to California LEV II Program

Throughout this preamble, we make

reference to California’s LEV II program

and its requirements. The LEV II

program was approved by the California

ARB at a hearing of November 5, 1998.

Numerous draft documents were

prepared by ARB staff in advance of that

hearing and made available to the

public. Those documents were

referenced in our NPRM and included

in the docket. Some of those documents

were modified as a result of changes to

the proposed program made at the

hearing and due to comments received

after the hearing. ARB prepared final

documents without significant change.

The final program was approved by

California’s Office of Administrative

Law on October 28, 1999 and filed with

the Secretary of State to become

effective on November 27, 1999.

We have placed copies of the latest

available documents, some of which we

used in the preparation of this final rule,

in the docket. You may also obtain these

documents and other information about

California’s LEV II program from ARB’s

web site: (www.arb.ca.gov/regact/levii/

levii.htm).

In the regulatory text that follows this

preamble, we incorporate by reference a

number of documents related to LEVII

and California test procedures under

6734 Federal Register / Vol. 65, No. 28 / Thursday, February 10, 2000 / Rules and Regulations

54These bins are unlikely to be used in the

Federal program because they contain the same

NOX standard as the Federal bins, but contain more

stringent NMOG standards than the Federal bins.

These bins, which provide extra opportunity for a

manufacturer to gain NMOG credits in California

are not needed or useful in the Federal program

where there is no NMOG corporate average

standard. The two deleted bins are bin 4 from the

proposed Tier 2 bins and bin 3 from the proposed

interim bins for LDV/LLDTs. Dropping these bins

does not affect harmonization with California

standards because the federal program includes

bins having the same NOX standard with higher

NMOG standards.

LEVII. These documents are available in

the docket for today’s rulemaking.

b. Corporate Average NOX Standard

The program we are finalizing today

will ultimately require each

manufacturer’s average full life NOX

emissions over all of its Tier 2 vehicles

to meet a NOX standard of 0.07 g/mi

each model year. Manufacturers will

have the flexibility to certify Tier 2

vehicles to different sets of exhaust

standards that we refer to as ‘‘bins,’’ but

will have to choose the bins so that their

corporate sales weighted average full

life NOX level for their Tier 2 vehicles

is no more than the 0.07 g/mi. (We

discuss the bins in the next subsection.)

A corporate average standard enables

the program’s air quality goals to be met

while allowing manufacturers the

flexibility to certify some models above

and some models below the standard.

Manufacturers can apply technology to

different vehicles in a more costeffective manner than under a single set

of standards that all vehicles have to

meet.

Each manufacturer will determine its

year-end corporate average NOX level by

computing a sales-weighted average of

the full life NOX standards from the

various bins to which it certified any

Tier 2 vehicles. The manufacturer will

be in compliance with the standard if its

corporate average NOX emissions for its

Tier 2 vehicles meets or falls below 0.07

g/mi. In years when a manufacturer’s

corporate average is below 0.07 g/mi, it

can generate credits. It can trade (sell)

those credits to other manufacturers or

use them in years when its average

exceeds the standard (i.e. when the

manufacturer runs a deficit). The

averaging program is described in detail

in later text.

c. Tier 2 Exhaust Emission Standard

‘‘Bins’’

We are finalizing a Tier 2 bin

structure having eight emission

standards bins (bins 1–8), each one a set

of standards to which manufacturers

can certify their vehicles. Table IV.B.–2a

shows the full useful life standards that

will apply for each bin in our final Tier

2 program, i.e. after full phase-in occurs

for all LDVs and LDTs. Two additional

bins, bins 9 and 10, will be available

only during the interim program and

will be deleted before final phase-in of

the Tier 2 program. Table IV.B.–2b

shows all the bins from Table IV.B.–2a

and also shows extra bins and higher

available standards for certain

pollutants that are available prior to full

Tier 2 phase-in. An eleventh bin, only

for MDPVs is discussed in section

IV.B.4.g.

Many bins have the same values as

bins in the California LEV II program as

a means to increase the economic

efficiency of the transition to as well as

model availability. Further, we added

bins that are not a part of the California

program to modestly increase the

flexibility of the program for

manufacturers without compromising

air quality goals. As discussed in

Section IV.B.4. below, we believe these

extra bins will help provide incentives

for manufacturers to produce vehicles

with emissions below 0.07 g/mi NOX.

The two highest of the ten bins shown

in Table IV.B.2b. are designed to

provide flexibility only during the

phase-in years and will terminate after

the standards are fully phased in,

leaving eight bins in place for the

duration of the Tier 2 program.

The NPRM full life standards

contained seven Tier 2 bins as well as

two separate tables of bins for interim

vehicles. We proposed that

manufacturers would be able to use all

the bins during the phase in years

regardless of whether they were

certifying Tier 2 vehicles or interim

vehicles.

The program we are finalizing today:

• Combines the bins from the NPRM;

• Omits two bins that were included

in the NPRM for harmony with

California but which are unlikely to be

used; 54;

• Adds 2 bins to increase compliance

flexibility without reducing

environmental benefits;

• Adds a temporary bin only for

MDPVs that expires after 2008. This bin

is in addition to the 10 bins shown in

tables of bins in this preamble;

• Establishes a PM value for the

highest bin available during the interim

program (bin 10) that is more stringent

than the corresponding standard in the

NLEV program;

• Provides temporary higher NMOG

standards that expire after 2006 for

certain interim LDT2s and LDT4s

produced by qualifying manufacturers.

Tables IV.B.–2a and 2b show the bins

for full life standards. Table IV.B.–2b is

repeated later in the text where

intermediate life standards are also

shown. These tables omit the temporary

bin for MDPVs. This bin is usable only

by MDPVs and is addressed separately

in section IV.B.4.g.

TABLE IV.B.–2A.—FINAL TIER 2 LIGHT-DUTY FULL USEFUL LIFE EXHAUST EMISSION STANDARDS

[Grams per mile]

Bin No. NOX NMOG CO HCHO PM

8 ............................................................................................................... 0.20 0.125 4.2 0.018 0.02

7 ............................................................................................................... 0.15 0.090 4.2 0.018 0.02

6 ............................................................................................................... 0.10 0.090 4.2 0.018 0.01

5 ............................................................................................................... 0.07 0.090 4.2 0.018 0.01

4 ............................................................................................................... 0.04 0.070 2.1 0.011 0.01

3 ............................................................................................................... 0.03 0.055 2.1 0.011 0.01

2 ............................................................................................................... 0.02 0.010 2.1 0.004 0.01

1 ............................................................................................................... 0.00 0.000 0.0 0.000 0.00

Federal Register / Vol. 65, No. 28 / Thursday, February 10, 2000 / Rules and Regulations 6735

55 In the NPRM, we proposed that hydrocarbon

standards would be measured in terms of ‘‘nonmethane organic gases’’ (NMOG) regardless of fuel.

For reasons explained elsewhere in this preamble

we will permit non-methane hydrocarbons (NMHC)

as an option in the final rule for all fuels except

alcohol fuels and compressed natural gas . NMHC

and NMOG are very similar for gasoline and diesel

fuel emissions.

TABLE IV.B.–2B.—TIER 2 LIGHT-DUTY FULL USEFUL LIFE EXHAUST EMISSION STANDARDS—INCLUDING BINS APPLICABLE

DURING INTERIM PROGRAM ONLY

[Grams per mile]

Bin No. NOX NMOG CO HCHO PM Comments

10 ................................................ 0.6 0.156/0.230 4.2/6.4 ......... 0.018/0.027 0.08 abcd

9 .................................................. 0.3 0.090/0.180 4.2 ............... 0.018 ........... 0.06 abc

8 .................................................. 0.20 0.125/0.156 4.2 ............... 0.018 ........... 0.02 b f

Notes:

aBin deleted at end of 2006 model year (2008 for HLDTs).

bThe higher of the two temporary NMOG, CO and HCHO values apply only to HLDTs.

cAn additional higher temporary bin restricted to MDPVs is discussed in section IV.B.4.g.

dOptional temporary NMOG standard of 0.280 g/mi applies for qualifying LDT4s and MDPVs only, see text.

eOptional temporary NMOG standard of 0.130 g/mi applies for qualifying LDT2s only, see text.

f

Higher temporary NMOG value of 0.156g/mi deleted at end of 2008 model year.

The corporate average concept using

bins will provide a program that gets

essentially the same emission

reductions we would expect from a

straight 0.07 g/mi standard for all

vehicles because all NOX emissions

from Tier 2 vehicles in bins above 0.07

g/mi will need to be offset by NOX

emissions from Tier 2 vehicles in bins

below 0.07 g/mile. This focus on NOX

allows NMOG 55 emissions to ‘‘float’’ in

that the fleet NMOG emission rate

depends on the mix of bins used to meet

the NOX standard. However, as you can

see by examining the bins, any

combination of vehicles meeting the

0.07 g/mi average NOX standard will

have average NMOG levels below 0.09

g/mi. The actual value will vary by

manufacturer depending on the sales

mix of the vehicles used to meet the

0.07 g/mi average NOX standard. In

addition, there will be overall

improvements in NMOG since Tier 2

incorporates HLDTs, which are not

covered by the NLEV program. Tier 2

also imposes tighter standards on LDT2s

than the NLEV program by making them

average with the LDVs and LDT1s.

NLEV has separate, higher standards for

LDT2s. We did not adopt any bins for

LDVs and LDTs with standards higher

than we proposed.

d. Schedules for Implementation

We recognize that the Tier 2 standards

pose greater technological challenges for

larger light duty trucks ( HLDTs) than

for LDVs and smaller trucks (LDT1s and

LDT2s). We believe that additional

leadtime is appropriate for HLDTs.

HLDTs have historically been subject to

less stringent vehicle-based standards

than lighter trucks and LDVs. Also,

HLDTs were not subject to the voluntary

emission reductions implemented for

LDVs, LDT1s and LDT2s in the NLEV

program. Consequently we are finalizing

as proposed, separate phase-in programs

for HLDTs and LDV/LLDTs . Our phasein approach will provide HLDTs with

extra time before they need to begin

phase-in to the final Tier 2 standards

and will also provide two additional

years for them to fully comply. Table

IV.B–3 provides a graphical

representation of how the phase-in of

the Tier 2 program will work for all

vehicles. This table shows several

aspects of the program:

• Phase-in of the Tier 2 standards;

• Phase-in/phase-out requirements of

the interim programs;

• Phase-in requirements of new

evaporative standards;

• Years that can be included in

alternative phase-in schedules;

• Years in which manufacturers can

bank NOX credits through ‘‘early

banking’’ and

• ‘‘Boundaries’’ on averaging sets in

the Tier 2 and interim programs.

• Averaging provisions for MDPVs

(see section IV.B.4.g. for discussion)

We discuss each of these topics in

detail below and make numerous

references to Table IV.B–3.

BILLING CODE 6560–50–P

6736 Federal Register / Vol. 65, No. 28 / Thursday, February 10, 2000 / Rules and Regulations

BILLING CODE 6560–50–C

As described in detail in the Response

to Comments document, the Alliance

proposal would have delayed final

implementation of Tier 2 standards

until 2011. We are not adopting the

Alliance’s time schedule, because we

believe the shorter schedule we

proposed is feasible and that there is no

reason to delay the final benefits of the

Tier 2 standards. In fact, numerous

commenters representing state,

environmental and health groups argued

that our original proposal gave

manufacturers too much time to bring

the HLDTs into line with LDVs and

LLDTs. We believe the two extra years

proposed in the NPRM remain

appropriate. HLDTs will face greater

challenges than LDVs/LLDTs because

their emission control systems will need

to be durable under potentially heavier

loads and tougher operating conditions

than LDV/LLDTs. Their sales are small

relative to the rest of the light duty fleet

(they will comprise about 14% of the

light duty fleet in 2004), and they will

benefit from industry experience with

the lighter vehicles. In addition, HLDTs

will not remain at high Tier 1 levels

until they phase-in to Tier 2. Rather,

they will have to meet interim standards

that impose a NOX cap of 0.60 g/mi and

phase-in a corporate average NOX

standard of 0.20 g/mi. These standards

represent a significant reduction from

Federal Register / Vol. 65, No. 28 / Thursday, February 10, 2000 / Rules and Regulations 6737

56Under Tier 1 standards, LDT3s are subject to

a 0.98 g/mi NOX standard while LDT4s are subject

to an even higher NOX standard of 1.53 g/mi.

57The NLEV program imposes NMOG average

standards that translate into full useful life NOX

levels of about 0.3 g/mi for LDV/LDT1s and 0.5 g/

mi for LDT2s.

58The NLEV program does not impose average

NOX standards, but the NMOG average standards

that it does impose will lead to full useful life NOX

levels of about 0.3 g/mi for LDV/LDT1s.

applicable Tier 1 standards.56 Interim

standards are discussed in detail later in

this preamble.

i. Implementation Schedule for Tier 2

LDVs and LLDTs

We are finalizing the implementation

schedule for the Tier 2 standards as

proposed in the NPRM. Thus, the

standards will take effect beginning

with the 2004 model year for light duty

vehicles and trucks at or below 6000

pounds GVWR (LDV/LLDTs).

Manufacturers will phase their vehicles

into the Tier 2 standards beginning with

25 percent of LDV/LLDT sales that year,

50 percent in 2005, 75 percent in 2006,

and 100 percent in 2007. Manufacturers

will be free to choose which vehicles are

phased-in each year. However, in each

year during (and after) the phase-in, the

manufacturer’s average NOX for its Tier

2 vehicles must meet the 0.07 g/mi

corporate average standard. This phasein schedule, which is consistent with

that of the California LEV II program,

provides between four and seven years

of leadtime for the manufacturers to

bring all of their LDV/LLDT production

into compliance. These vehicles

constitute about 86 percent of the light

duty fleet.

To increase manufacturer flexibility

and provide incentives for early

introduction of Tier 2 vehicles, we are

also finalizing provisions from the

NPRM that permit manufacturers to use

alternative phase-in schedules that will

still require 100 percent phase-in by

2007, but recognize the benefits of early

introduction of Tier 2 vehicles, and

allow manufacturers to adjust their

phase-in to better fit their own

production plans. (See section

IV.B.4.b.ii. below.)

ii. Implementation Schedule for Tier 2

HLDTs

The Tier 2 phase-in schedule for

HLDTs is also being finalized as

proposed. The phase-in for final Tier 2

standards for HLDTs will start later and

end later than that for LDVs and LLDTs.

Fifty percent of each manufacturer’s

HLDTs must meet Tier 2 standards in

2008, and 100 percent must meet Tier

2 standards in 2009. As with the LDV/

LLDTs, the Tier 2 HLDTs must meet a

corporate average NOX standard of 0.07

g/mi. This delayed phase-in schedule:

• Provides significant interim

emission reductions starting in 2004

(discussed separately below);

• Recognizes the relatively high

emission standards that currently apply

to HLDTs;

• Provides manufacturers with

adequate lead time before they must

bring HLDTs into compliance with final

Tier 2 standards;

• Provides manufacturers the

opportunity to apply and evaluate Tier

2 technology on LDV/LLDTs before

having to apply it to HLDTs; and

• Provides manufacturers the

opportunity to apply and evaluate Tier

2 technology on HLDTs on a relatively

small scale to meet California LEV II

requirements before having to apply it

to HLDTs nationwide.

As with the LDV/LLDTs above, to

encourage early introduction of Tier 2

HLDTs and to provide manufacturers

with greater flexibility, we are finalizing

provisions to permit manufacturers to

generate early Tier 2 NOX credits and to

use alternative phase-in schedules that

still result in 100% phase-in by 2009.

(See sections IV.B.4.d.iv. and IV.B.4.b.ii,

respectively, below.)

e. Interim Standards

The interim standards discussed

below are a major source of emission

reductions in the early years of the

vehicle control program. The NOX

emission standards for LDT2s and

LDT4s, which comprise about 40

percent of the fleet, are more stringent

than the corresponding standards in the

NLEV and CAL LEV I programs. These

standards also are important because

they set the stage for a smooth transition

to the final Tier 2 standards.

The two groups of vehicles (LDV/

LLDTs and HLDTs) will be approaching

the Tier 2 standards from quite different

emission ‘‘backgrounds’’. LDV/LLDTs

will be at NLEV levels, which require

NOX emissions of either 0.3 or 0.5g/mi

on average, 57 while HLDTs will be at

Tier 1 levels facing NOX standards of

either 0.98 or 1.53 g/mi, depending on

truck size. These Tier 1 NOX levels for

HLDTs are very high (by a factor of 14–

22) relative to our 0.07 g/mi Tier 2 NOX

average. To address the disparity in

emission ‘‘backgrounds’’, while gaining

air quality benefits from vehicles during

the phase-in period, we proposed and

are finalizing separate interim average

NOX standards for the two vehicle

groups during the phase-in period. The

provisions described below will apply

in 2004 for all LDVs and LDTs not

certified to Tier 2 standards. The

relationship of the interim programs to

the final Tier 2 standards is shown in

Table IV.B–3.

Interim vehicles will certify to the

same bins as Tier 2 vehicles. As

described earlier in this preamble, we

have merged the tables of bins from the

NPRM for simplicity and added a few

bins. Bins 9 and 10 were drawn from the

tables of interim bins in the NPRM, and

are intended only for use during the

phase-in years. Therefore, these two

bins will be discontinued after 2006

(2008 for HLDTs).

i. Interim Exhaust Emission Standards

for LDV/LLDTs

Beginning with the 2004 model year,

all new LDVs, LDT1s and LDT2s not

incorporated under the Tier 2 phase-in

will be subject to an interim corporate

average NOX standard of 0.30 g/mi. This

is effectively the LEV NOX emission

standard for LDVs and LDT1s under the

NLEV program.58 This interim program

will hold LDVs and LLDTs to NLEV

levels if they are not yet subject to Tier

2 standards during the phase-in. By

implementing these interim standards

for LDVs and LLDTs we will ensure that

the accomplishments of the NLEV

program continue. Additionally, this

program will bring about substantial

and important NOX emission reductions

from LDT2s in the early years of the

program. LDT2s will be held to a 0.3 g/

mi NOX average in contrast to a 0.5 g/

mi average in the NLEV program.

Because the Tier 2 standards are

phased-in beginning in the 2004 model

year, the interim standards for LDVs and

LLDTs apply to fewer vehicles each

year, i.e., they are ‘‘phase-out’’

standards. Table IV.B–2 shows the

maximum percentage of LDVs and

LLDTs subject to the interim standards

each year— 75% in 2004, 50% in 2005,

25% in 2006 and 0% in 2007.

As mentioned above, the interim

program for LDV/LLDTs is designed to

hold these vehicles to the NLEV NOX

level for LDVs and LDT1s, and a few of

our bins are derived from the NLEV

program. Our proposal to bring LDT2s

into line with the LDVs and LDT1s

during the interim program by requiring

all LDVs, LDT1s and LDT2s to meet the

same average NOX standard (0.30) g/mi

was of concern to industry commenters.

In the final rule, we are retaining this

requirement, but we are providing an

optional NMOG standard of 0.130 for

LDT2s certified to bin 9 when the

manufacturers of those LDT2s elect to

bring all of their 2004 model year

6738 Federal Register / Vol. 65, No. 28 / Thursday, February 10, 2000 / Rules and Regulations

59 In the Tier 1 program, exhaust hydrocarbon

standards are in terms of NMHC, not NMOG.

However, as we have explained elsewhere in this

preamble, NMHC and NMOG results are very

similar for gasoline and diesel-fueled vehicles.

HLDTs under our interim program and

phase 25% of those HLDTs into the 0.20

g/mi average NOX standard. (See ii.

below). These provisions are discussed

in detail below and also in the Response

to Comments document.

ii. Interim Exhaust Emission Standards

for HLDTs

Our interim standards for HLDTs will

begin in the 2004 model year similar to

our proposal in the NPRM. The Interim

Program for HLDTs will require

compliance with a corporate average

NOX standard of 0.20 g/mi that will be

phased in between 2004 and 2007. The

interim HLDT standards, like those for

LDV/LLDTs will make use of the bins in

Tables IV.B. –4 and –5. We believe that

our interim standards, which start in

2004, will produce significant emission

reductions from HLDTs produced

during the interim period. For example,

HLDTs will have to reduce emissions in

the interim program relative to the

NLEV program. These standards, by

themselves, represent a major reduction

in emission standards and we believe it

is likely that some manufacturers will

apply their Tier 2 technology to HLDTs

in order to comply with the interim

standards.

As shown in Table IV.B.–3, the phasein schedule for HLDTs to the 0.20 g/mi

corporate average NOX standard will be

25 percent in the 2004 model year

(except as noted below), 50 percent in

2005, 75 percent in 2006, and 100

percent in 2007. As for the Tier 2

standards, alternative phase-in

schedules (see Section IV.B.4.b.ii.) will

be available. The interim program will

remain in effect through 2008 to cover

those HLDTs not yet phased into the

Tier 2 standards (a maximum of 50%).

Interim HLDTs not subject to the

interim corporate average NOX standard

during the applicable phase-in years

(2004–2006 or 2005–2006) will be

subject to the least stringent bins so

their NOX emissions will be effectively

capped at 0.60 g/mi. These vehicles will

be excluded from the calculation to

determine compliance with the interim

0.20 g/mi average NOX standard.

This approach will allow more time

for manufacturers to bring the more

difficult HLDTs to Tier 2 levels while

achieving real reductions from those

HLDTs that may present less of a

challenge.

Due to statutory leadtime

considerations, we were not able to

finalize the HLDT standards to be in

effect by the time the 2004 model year

begins. For this reason, we are providing

incentives for HLDTs to comply with

the Tier 2 standards for all 2004 model

year HLDTs. This change and the

leadtime issue are discussed further

under section IV.B.4.e. below and also

in the Response to Comments

document.

iii. Interim Programs Will Provide

Reductions Over Previous Standards

As is the case with the primary Tier

2 standard structure, the interim

programs will focus on NOX but will

also provide reductions in NMOG

beyond the NLEV program. This is

because the interim programs will

reduce emissions from LDT2s and

HLDTs compared to their previous

standards. Without the interim

standards, HLDTs could be certified to

the Tier 1 NMHC levels (0.46 g/mi or

0.56 g/mi). With the interim standards,

however, exhaust NMOG 59 should

average approximately 0.09 g/mi for all

non-Tier 2 LDV/LLDTs and 0.24 g/mi or

less for HLDTs. CO under Tier 1 could

be as high as 7.3 g/mi for LDT4s. Under

the interim program, CO standards for

most bins will be well below 7.3 g/mi.

f. Generating, Banking, and Trading NOX

Credits

As proposed in the NPRM and

finalized in this notice, manufacturers

will be permitted to average the NOX

emissions of their Tier 2 vehicles and

comply with a corporate average NOX

standard. In addition, when a

manufacturer’s average NOX emissions

fall below the corporate average NOX

standard, it can generate NOX credits for

later use (banking) or to sell to another

manufacturer (trading). NOX credits will

be available under the Tier 2 standards,

the interim standards for LDVs and

LLDTs, and the interim standards for

HLDTs. These NOX credit provisions

will facilitate compliance with the fleet

average NOX standards and be very

similar to those currently in place for

NMOG emissions under California and

federal NLEV regulations.

A manufacturer with an average NOX

level for its Tier 2 vehicles in a given

model year below the 0.07 gram per

mile corporate average standard can

generate Tier 2 NOX credits that it can

use in a future model year when its

average NOX might exceed the 0.07

standard. Manufacturers must calculate

their corporate average NOX emissions

at year end and then compute credits

generated based on how far below 0.07

g/mi the corporate average falls.

Manufacturers will be free to retain

any credits they generate for future use

or to trade (sell) those credits to other

manufacturers. Credits retained or

purchased can be used by

manufacturers with corporate average

Tier 2 NOX levels above 0.07 g/mi.

Under provisions described in Section

IV.B.4.d.iv., manufacturers can

implement NOX emission reductions as

early as the 2001 model year and earn

early Tier 2 NOX credits to help LDVs

and LLDTs meet Tier 2 standards.

Similarly, manufacturers can earn early

credits for HLDTs as early as the 2001

model year. In model years up through

2005, manufacturers can earn extra

credits when they certify vehicles to

bins 1 or 2.

Banking and trading of NOX credits

under the interim non-Tier 2 standards

will be similar to that under the Tier 2

standards, except that a manufacturer

must determine its credits based upon

the 0.30 or 0.20 gram per mile corporate

average NOX standard applicable to

vehicles in the interim programs. As we

proposed in the NPRM, interim credits

from LDVs/LLDTs and interim credits

from HLDTs will not be permitted to be

used interchangeably due to the

differences in the interim corporate

average NOX standards. As proposed in

the NPRM, there will be no provisions

for early banking under the interim

standards and manufacturers will not be

allowed to use interim credits to address

the Tier 2 NOX average standard. This

is because we remain concerned that

credits can be generated relatively easily

under less stringent standards (the Tier

1 or interim standards) and then used in

such a way to delay implementation of

the Tier 2 standards.

Banking and trading of NOX credits

and related issues are discussed in

greater detail in Section IV.B.4.d. below.

2. Why Are We Finalizing the Same Set

of Standards for Tier 2 LDVs and LDTs?

Before we provide a more detailed

description of the vehicle program, we

want to review two overarching

principles of today’s rule. The first is

our goal to bring all LDVs and LDTs

under the same set of emission

standards. Historically, LDTs—and

especially the heavier trucks in the

LDT3 and LDT4 categories—have been

subject to less stringent emission

standards than LDVs (passenger cars). In

recent years the proportion of light truck

sales has grown to approximately 50

percent. Many of these LDTs are

minivans, passenger vans, sport utility

vehicles and pick-up trucks that are

used primarily or solely for personal

transportation; i.e., they are used like

passenger cars.

As vehicle preferences have

increasingly shifted from passenger cars

to light trucks there has been an

Federal Register / Vol. 65, No. 28 / Thursday, February 10, 2000 / Rules and Regulations 6739

60Because of the different phase-in percentages

and phase-in schedules for the two groups, during

the duration of the phase-in (through 2008),

manufacturers will average Tier 2 LDV/LLDTs

separately from HLDTs.

61The Alliance proposed NMHC standards in lieu

of the NMOG standards we proposed and are

finalizing today. We are including a provision in

the final rule to accept NMHC results, subject to an

adjustment factor, to demonstrate compliance with

NMOG standards, although we are not adopting the

fixed standards proposed by the Alliance.

62The interim PM standard in this new bin,

which represents a reduction from the NLEV PM

standards, should be feasible without

aftertreatment. The technologies needed to meet the

PM standard we proposed for this bin would likely

have required low sulfur diesel fuel, which may not

be widely available during the interim program.

This change is also discussed in section V.A.

accompanying increase in emissions

over what otherwise would have

occurred because of the increase in

miles traveled by LDTs and the less

stringent standards for LDTs as

compared to LDVs. As Section III. above

makes clear, reductions in these excess

emissions (and in other mobile and

stationary source emissions) are

seriously needed. Since both LDVs and

LDTs are within technological reach of

the standards in the Tier 2 bin structure,

and since none of the comments have

been persuasive that manufacturers can

not meet the standards, we are finalizing

our proposal to equalize the regulatory

useful life mileage for LDVs and LDTs

and apply the same Tier 2 exhaust

emission standard bins to all of them.

This program will ensure that

substantial reductions occur in all

portions of the light-duty fleet and that

the movement from LDVs to LDTs will

not counteract these reductions.

Once the phase in periods end for all

vehicles in 2009, manufacturers will

include all LDVs and LDTs together in

calculating their corporate average NOX

levels.60 As mentioned above and

described in more detail in Section

IV.B.–4. below, manufacturers can

choose the emission bin for any test

group of vehicles provided that, on a

sales weighted average basis, the

manufacturer meets the average NOX

standard of 0.07 g/mi for its Tier 2

vehicles that year.

Some manufacturers have suggested

that a program with different

requirements is needed for heavy LDTs.

Recognizing that compliance will be

most challenging for HLDTs, the delay

in the start of the phase-in and the

additional phase-in years for those

vehicles will allow manufacturers to

delay the initial impact of the Tier 2

standards until the 2008 model year.

This represents four additional model

years of leadtime beyond the time when

passenger cars and LDT1s and LDT2s

will achieve Tier 2 standards in

substantial numbers. We believe this

phase-in and other provisions of this

rule respond to these concerns. Note

that in the NPRM, we requested

comments on the need for different

hydrocarbon standards for these

vehicles recognizing that a tradeoff often

exists between HC and NOX emissions.

We also proposed that several bins have

higher hydrocarbon standards for

HLDTs during the interim program. We

are finalizing these bins as proposed.

Also, as an option, we are permitting the

use of NMOG values similar to those in

the NLEV program for bins 9 and 10

only for certain LDT2s and LDT4s

during the interim program (see section

IV.B.1.e.ii. above for details).

We are not adopting the Alliance’s

proposed phase-in schedule which

would have provided a phase-in lasting

until 2011. At the end of the Alliance’s

proposed phase-in, all vehicles would

comply with an average NOX standard

of 0.07 g/mi. A fixed 0.09 NMHC

standard would apply to LDVs and

LLDTs while a fixed 0.156 NMHC

standard would apply to HLDTs.61 Our

final program provides HLDTs until

2008 before any have to meet 0.07 g/mi

on average and permits them to be

averaged with LDV/LLDTs beginning in

2009, when all must meet 0.07 g/mi

NOX on average. We believe that eight

years is a significant amount of leadtime

to apply Tier 2 technology. We heard

clearly from the public hearings and

written comments that the public sees

no justification for and does not want

even more time provided for HLDTs.

Furthermore, we see no technological

need for more time than we proposed.

Indeed, many believe that HLDTs

should meet the Tier 2 standards in step

with the LDV/LLDTs.

We are not promulgating the fixed

NMHC standards suggested by the

Alliance, but are sticking with the

concept of bins containing lower NMOG

standards connected to lower NOX (and

other) standards. We believe that

providing final exhaust emission

standards for HLDTs that deviate from

those for LDV/LLDTs would violate one

of the overarching principles of the Tier

2 program, i.e. that all LDVs and LDTs

should be subject to the same exhaust

emission standards. Further, the idea of

NMOG values that differ from

California’s runs counter to other

arguments raised by the Alliance that

EPA should align bins with California’s

to promote 50 state certification of test

groups.

3. Why Are We Finalizing the Same

Standards for Both Gasoline and Diesel

Vehicles?

The second overarching principle of

our vehicle program is the use of the

same Tier 2 standards for all LDVs and

LDTs, regardless of the fuel they are

designed to use. The same exhaust

emission standards and useful life

periods we are finalizing today will

apply whether the vehicle is built to

operate on gasoline or diesel fuel or on

an alternative fuel such as methanol or

natural gas. Diesel powered LDVs and

LDTs tend to be used in the same

applications as their gasoline

counterparts, and thus we believe they

should meet the same standards. Less

stringent standards for diesels could

create incentives for manufacturers to

build more diesel vehicles, thus

endangering the emission reductions

expected by this program.

Manufacturers have expressed

concerns that diesel-fueled vehicles

would have difficulty meeting NOX and

particulate matter levels like those

contained in today’s rule. Clearly, these

standards will be challenging. As

discussed in Section IV.A.–1. above, we

expect that the Tier 2 NOX and NMOG

standards will be challenging for

gasoline vehicles, but that major

technological innovations will not be

required. For diesels, however, the final

Tier 2 NOX and PM standards will likely

require applications of aftertreatment,

most likely accompanied by changes in

diesel fuel as such devices are sensitive

to diesel fuel quality, particularly sulfur

content. We do not believe such devices

will be necessary to meet the top bin for

our interim standards.62 Given the small

percentage of diesel vehicles and the

phase-in of the standards, that bin

should be sufficient for any

manufacturer to market diesels and still

comply with the interim program. We

anticipate that manufacturers that

choose to build diesel vehicles for the

final Tier 2 standards will adopt

aftertreatment technologies such as NOX

adsorber catalysts and continuously

regenerating particulate traps to meet

Tier 2 requirements. We issued an

Advanced Notice of Proposed

Rulemaking to seek input on potential

diesel fuel quality changes on May 13,

1999 (64 FR 26142). We anticipate

issuing a Notice of Proposed

Rulemaking to reduce the sulfur limit

on diesel fuel in the spring of 2000

followed by a final rule in late 2000.

Our goal in that rulemaking is to have

low sulfur diesel fuel available which

will allow diesel vehicles to meet the

Tier 2 standards, within the bin

structure, by the time the Tier 2

standards are required for the entire

fleet.

6740 Federal Register / Vol. 65, No. 28 / Thursday, February 10, 2000 / Rules and Regulations

63A ‘‘test group’’ is the basic classification unit

for certification of light-duty vehicles and trucks

under EPA certification procedures for the

CAP2000 program. ‘‘Test group’’ is a broader

classification unit than ‘‘engine family’’ used prior

to the implementation of the CAP2000 program. We

discuss the CAP2000 program in more detail in

section V.A.9. of this preamble.

64The regulatory ‘‘useful life’’ value for Tier 2

vehicles is specifically addressed in Section V.A.2.

of this preamble. Full useful life will be 10 years

or 120,000 miles for all vehicles except LDT3s and

LDT4s, for which it is 11 years or 120,000 miles.

Intermediate useful life, where standards are

applicable, is 5 years or 50,000 miles.

65EPA’s current standards for Clean Fuel

Vehicles are less stringent than the Tier 2 standards.

See 40 CFR 88.104–94. The Tier 2 standards will

supercede the current CFV standards, and the

Agency intends to undertake a rulemaking to revise

the CFV standards accordingly.

66 In some cases our bins do not match

California’s exactly, because they have higher

NMOG standards. These bins ‘‘cover’’ the California

bin in that a vehicle certified to the California

standards will comply with the standards in these

bins.

Today, diesels comprise less than

one-half of one percent of all LDV/LDT

sales. While this is a small fraction, the

potential exists for diesels to gain a

considerable market share in the future.

All one need do is review the dramatic

increase in recent years of diesel engine

use in the lightest category of heavy

duty vehicles (8500–10,000 pounds

GVWR) to see the potential for

significant diesel engine use in LDTs,

and perhaps LDVs, in the future. Just

ten years ago, diesels made up less than

10 percent of this class of vehicles. In

1998, this fraction approached 50

percent.

The potential impact of large-scale

diesel use in the light-duty fleet

underscores the need for the same

standards to apply to diesels as other

vehicles. Given the health concerns

associated with diesel PM emissions

(see Section III. above), we believe that

it is prudent to address PM emissions

from diesel LDVs and LDTs while their

numbers are relatively small. In this

way the program can minimize the PM

impact that would accompany

significant growth in this market

segment while allowing manufacturers

to incorporate low-emission technology

into new light-duty diesel engine

designs.

4. Key Elements of the Vehicle Program

The previous subsections IV.B.–1.2.

and 3. provide an overview of the Tier

2 vehicle program and the two key

principles it is built on. This subsection

elaborates on the major vehicle-related

elements of today’s rule. Later in this

preamble, Section V.A. discusses the

rest of the vehicle provisions.

a. Basic Exhaust Emission Standards

and ‘‘Bin’’ Structure

Our final Tier 2 program contains a

basic requirement that each

manufacturer meet, on average, a full

useful life NOX standard of 0.07 g/mi for

all its Tier 2 LDVs and LDTs.

Manufacturers will have the flexibility

to choose the set of standards that a

particular test group 63 of vehicles must

meet. For a given test group of LDVs or

LDTs, manufacturers will select a set of

full useful life 64 standards from the

same row (‘‘emission bin’’ or simply

‘‘bin’’) in Table IV.B.–4. below. Each bin

contains a set of individual NMOG, CO,

HCHO, NOX, and PM standards. For

technology harmonization purposes, our

proposed emission bins include or

otherwise cover all of those adopted in

California’s LEV II program.65,66

In the NPRM, we proposed that

interim vehicles and Tier 2 vehicles

(except for those Tier 2 vehicles in the

lowest bins) would also have to meet

intermediate useful life standards, i.e.,

standards that apply for 5 years or

50,000 miles. We are finalizing these

intermediate useful life standards as

proposed. Where we have added new

full life bins, we have included

corresponding intermediate life bins as

appropriate. Our intermediate life

standards are generally aligned with

California’s, they only impact the higher

bins, and we do not believe they add

substantial burden to the program.

Further, they provide a check on the

allowed emission deterioration during

the life of the vehicle. For the final rule,

we have made two changes involving

intermediate life standards. First, we are

providing that diesel vehicles, which

will likely certify to bin 10 during the

interim program, may opt not to meet

the intermediate life standards

associated with this bin. Low sulfur

diesel fuel may be needed for diesels to

meet our interim intermediate life

standards and it is not likely to be

widely available during the time frame

of the interim program. Secondly, for all

vehicles, we are finalizing a provision

that will make intermediate life

standards optional for any test group

that is certified to a full useful life of

150,000 miles. This provision is

described in more detail with other

useful life issues in section V.B.

TABLE IV.B–4.—TIER 2 LIGHT–DUTY FULL USEFUL LIFE EXHAUST EMISSION STANDARDS

[Grams per mile]

Bin No. NOX NMOG CO HCHO PM Comments

10 ............................................... 0.6 0.156/0.230 4.2/6.4 ......... 0.018/0.027 0.08 (a,b,c,d)

9 ................................................. 0.3 0.090/0.180 4.2 ............... 0.018 ........... 0.06 (a,b,e)

The above temporary bins expire in 2006 (for LDVs and LLDTs) and 2008 (for HLDTs)

8 ................................................. 0.20 0.125/0.156 4.2 ............... 0.018 ........... 0.02 (b,f)

7 ................................................. 0.15 0.090 ........... 4.2 ............... 0.018 ........... 0.02

6 ................................................. 0.10 0.090 ........... 4.2 ............... 0.018 ........... 0.01

5 ................................................. 0.07 0.090 ........... 4.2 ............... 0.018 ........... 0.01

4 ................................................. 0.04 0.070 ........... 2.1 ............... 0.011 ........... 0.01

3 ................................................. 0.03 0.055 ........... 2.1 ............... 0.011 ........... 0.01

2 ................................................. 0.02 0.010 ........... 2.1 ............... 0.004 ........... 0.01

1 ................................................. 0.00 0.000 ........... 0.0 ............... 0.000 ........... 0.00

Notes:

aBin deleted at end of 2006 model year (2008 for HLDTs).

bThe higher temporary NMOG, CO and HCHO values apply only to HLDTs and expire after 2008.

cAn additional temporary higher bin restricted to MDPVs is discussed in section IV.B.4.g.

dOptional temporary NMOG standard of 0.280 g/mi applies for qualifying LDT4s and MDPVs only.

eOptional temporary NMOG standard of 0.130 g/mi applies for qualifying LDT2s only, see text.

f Higher temporary NMOG standard is deleted at end of 2008 model year.

Federal Register / Vol. 65, No. 28 / Thursday, February 10, 2000 / Rules and Regulations 6741

TABLE IV.B.–5.—LIGHT-DUTY INTERMEDIATE USEFUL LIFE (50,000 MILE) EXHAUST EMISSION STANDARDS

[Grams per mile]

Bin No. NOX NMOG CO HCHO PM Comments

10 ............................................... 0.4 0.125/0.160 3.4/4.4 ......... 0.015/0.018 (a,b,c,d,f,h)

9 ................................................. 0.2 0.075/0.140 3.4 ............... 0.015 ........... (a,b,e,h)

The above temporary bins expire in 2006 (for LDVs and LLDTs) and 2008 (for HLDTs)

8 ................................................. 0.14 0.100/0.125 3.4 ............... 0.015 ........... (b,g,h)

7 ................................................. 0.11 0.075 ........... 3.4 ............... 0.015 ........... (h)

6 ................................................. 0.08 0.075 ........... 3.4 ............... 0.015 ........... (h)

5 ................................................. 0.05 0.075 ........... 3.4 ............... 0.015 ........... (h)

Notes:

aBin deleted at end of 2006 model year (2008 for HLDTs).

bThe higher temporary NMOG, CO and HCHO values apply only to HLDTs and expire in 2008.

cAn additional higher temporary bin restricted to MDPVs is discussed in section IV.B.4.g.

dOptional temporary NMOG standard of 0.195 g/mi applies for qualifying LDT4s and MDPVs only.

eOptional temporary NMOG standard of 0.100 g/mi applies for qualifying LDT2s only, see text.

f Intermediate life standards are optional for diesels certified to bin 10.

g Higher temporary NMOG value deleted at end of 2008 model year.

h. Intermediate life standards are optional for any test group certified to a 150,000 mile useful life (if credits are not claimed).

Under a ‘‘bins’’ approach, a

manufacturer may select a set of

emission standards (a bin) to comply

with, and a test group must meet all

standards within that bin. Ultimately,

the manufacturer must also ensure that

the emissions of a targeted pollutant—

NOX in this case—from all of its

vehicles taken together meet a

‘‘corporate average’’ emission standard.

This corporate average emission

standard ensures that a manufacturer’s

production yields the required overall

emission reductions. (See Section IV.B.–

4.c. below for more discussion of the

corporate average NOX standard.)

In addition to the Tier 2 standards

described above, we are also finalizing

an interim average NOX standard

derived from the LDV/LDT1 NLEV

program to cover all non-Tier 2 LDVs

and LLDTs during the Tier 2 phase-in.

We are finalizing a separate interim

average NOX standard for HLDTs. As in

the Tier 2 program, manufacturers will

select bins from Table IV.B.–4 to use to

comply with the interim standards. Bins

with NOX values at or above 0.07 g/mi

also have associated intermediate life

standards which are shown in Table

IV.B.–5. (We describe the interim

standards in detail in Section IV.B.4.e.

below.)

i. Why Are We Including Extra Bins?

Compared to the CalLEV II program,

our Tier 2 proposal included additional

bins. The California program contains

no bins that will allow NOX levels above

the 0.07 g/mi level. Therefore, under the

California program, no engine family

can be certified above 0.07 g/mi, even

with the application of offsetting

credits. We proposed to add two bins

(with NOX values of 0.15 and 0.20)

above the 0.07 bin and another below

(with a NOX value of 0.04) to provide

manufacturers with additional

flexibility. Based upon comments

received from the Alliance and others

that additional bins provide important

added flexibility, we are finalizing a

total of three bins above the LEV level

(the additional bin has a NOX value of

0.10 g/mi) and are adding one more

below the LEV level (this additional bin

has a NOX value of 0.03 g/mi). Due to

the NOX averaging requirement of this

rule, these bins will not result in any

increase in NOX emissions. Further,

these bins will address concerns raised

by some that a wider variety of bins, and

bins with higher NOX values, are

needed to avoid a situation where the

Tier 2 program discourages the

development of advanced technology

high fuel economy vehicles, which may,

at least in their earliest years, have NOX

emissions higher than more

conventional vehicles.

In our NPRM we proposed that during

the Tier 2 phase-in years (through 2006

for LDV/LLDTs and 2008 for HLDTs),

bins from the applicable interim

program would be available to enhance

the flexibility of the program by

providing manufacturers with

additional bins having NOX standards

above 0.07 g/mi. In the NPRM, we

showed the interim bins in separate

tables for LDV/LLDTs and HLDTs.

There was considerable overlap across

the two tables and with the Tier 2 bins.

In this final rule, we have consolidated

the interim bins and the Tier 2 bins into

one table for simplicity and ease of

reference. The interim programs for

non-Tier 2 vehicles are described in

detail in section IV.B.4.e.

While some commenters were

concerned about the existence of bins

above NOX = 0.07 g/mi, we believe that

the additional higher bins actually

provide incentive for manufacturers to

produce vehicles below 0.07 g/mi of

NOX. We believe this incentive exists

because manufacturers will have some

vehicles (especially larger LDTs) that

they might find more cost effective to

certify to levels above the 0.07 g/mi

average standard. However, to do this

they will have to offset those vehicles in

our NOX averaging system with vehicles

certified below 0.07 g/mi. The bins at

NOX = 0.04 g/mi and NOX = 0.03 g/mi

will provide greater opportunity to do

this. Thus, the extra bins serve two

purposes; they provide additional

flexibility to manufacturers to address

technological differences and costs, and

they provide those manufacturers with

incentives to produce cleaner vehicles

and thus advance emission control

technology.

We are finalizing a bins approach

with the bins shown in Tables IV.B.4

and 5 to provide adequate and

appropriate emission reductions and

manufacturer flexibility. This structure

will help to accelerate technological

innovation. We requested comment on

whether we should include up to two

additional bins between NOX = 0.07 and

NOX = 0.15. Based upon manufacturer

comment, we have added an additional

bin (bin 6 ) with NOX = 0.10. This bin

will provide greater flexibility for

manufacturers who may find it more

cost-effective to produce some vehicles

slightly above 0.07 but have difficulties

meeting a 0.07 g/mi average NOX

standard if they must certify them to a

NOX level of 0.15 g/mi.

We requested comment on whether

our Tier 2 bin in the NPRM with NOX

= 0.20 (our final bin 8) should be

eliminated when the Tier 2 phase-in is

completed (after 2007 for LDV/LLDTs

6742 Federal Register / Vol. 65, No. 28 / Thursday, February 10, 2000 / Rules and Regulations

67For Tier 2 vehicles (and for interim vehicles),

the term ‘‘U.S. sales’’ means, for a given model year,

those sales in states other than California and any

states that have adopted the California program.

and after 2009 for HLDTs). Numerous

commenters argued that our highest

bins were too lenient. Comments from

manufacturers were opposed to

eliminating bin 8 and we see little

downside to having bins higher than the

0.07 NOX standard, given that, for all of

the vehicles that will use this bin,

manufacturers will have to offset the

excess emissions by selling vehicles

certified below 0.07 g/mi NOX under the

averaging requirement. Thus, we are

retaining bin 8.

b. The Program Will Phase in the Tier

2 Vehicle Standards Over Several Years

i. Primary Phase-In Schedule

We are finalizing as proposed our

plan to phase in the Tier 2 standards for

LDV/LLDTs over a four year period

beginning in 2004 and we are also

finalizing as proposed a delayed two

year phase-in beginning in 2008 for

HLDTs. These phase-in schedules are

shown in Table IV.B.–2 and are also

shown separately in Tables IV.B.–6 and

7. We believe the flexibility of this dual

phase-in approach is appropriate

because the Tier 2 program will

encompass all light-duty vehicles and

trucks and will result in widespread

applications of upgraded and improved

technology across the fleet. The program

will require research, development,

proveout, and certification of all lightduty models, and manufacturers may

need longer lead time for some vehicles,

especially HLDTs. Also, manufacturers

may wish to time compliance with the

Tier 2 standards to coincide with other

changes such as the roll out of new

engines or new models. In order to

begin the introduction of very clean

vehicles as soon as possible while

avoiding imposing unnecessary

inefficiencies on vehicle manufacturers,

we believe this practical but aggressive

phase-in schedule effectively balances

air quality, technology, and cost

considerations.

In each year, manufacturers will have

to ensure that the specified fraction of

their U.S. sales: 67

• Meets Tier 2 standards for exhaust

emissions, including Supplemental

Federal Test Procedure (SFTP)

standards (discussed in Section V.A.–3.

below);

• Meets Tier 2 standards for

evaporative emissions (discussed in

Section IV.B.–4.f. below); and

• Meets the corporate average Tier 2

NOX standard.

Manufacturers will have to meet the

Tier 2 exhaust requirements (i.e., all the

standards of a particular bin plus the

SFTP standards) using the same

vehicles. Vehicles not covered by the

Tier 2 standards during the phase-in

years (2004–2008) will have to meet

interim standards described in Section

IV.B.4.e. below and the existing

evaporative emission as well as the

applicable SFTP standards.

Manufacturers can elect to meet the

percentage phase-in requirements for

evaporative and exhaust emissions

using two different sets of vehicles. We

believe that because of interactions

between evaporative and exhaust

control strategies, manufacturers will

generally address the Tier 2 evaporative

phase-in with the same vehicles that

they use to meet the exhaust phase-in.

However, the primary focus of today’s

proposal is on exhaust emissions, and

the flexibility for manufacturers to use

different sets of vehicles in complying

with the phase-in schedule for

evaporative standards and for the

exhaust standards will have no

environmental down side that we are

aware of. It is possible that some

exhaust emission improvements might

even occur sooner than they otherwise

would if a manufacturer is able to move

ahead with the roll-out of a model with

cleaner exhaust emissions without

having to wait for the development of

suitable evaporative controls to be

completed for that model.

TABLE IV.B.–6.—PRIMARY PHASE-IN

SCHEDULE FOR SALES OF TIER 2

LDVS AND LLDTS

Model year

Required percentage of

light-duty vehicles and light

light-duty

trucks

(percent)

2004 ...................................... 25

2005 ...................................... 50

2006 ...................................... 75

2007 ...................................... 100

TABLE IV.B.–7.—PRIMARY PHASE-IN

SCHEDULE FOR SALES OF TIER 2

HLDTS

Model year

Required percentage of

heavy lightduty trucks

(percent)

2008 ...................................... 50

2009 ...................................... 100

We are finalizing our proposed phasein approach, in which vehicle sales will

be determined according to the ‘‘point

of first sale’’ method outlined in the

NLEV rule. Vehicles with points of first

sale in California or a state that has

adopted the California LEV II program

(if any) will be excluded from the

calculation. The ‘‘point of first sale’’

method recognizes that most vehicle

sales will be to dealers and that the

dealers’ sales will generally be to

customers in the same geographic area.

While some sales to California residents

(or residents of states that adopt

California standards) may occur from

other states and vice-versa, we believe

these sales will be far too small to have

any significant impact on the air quality

benefits of the Tier 2 program or the

manufacturers’ ability to demonstrate

compliance.

ii. Alternative Phase-In Schedule

We are finalizing, as proposed, that

manufacturers may introduce vehicles

earlier than required to earn the

flexibility to make offsetting

adjustments, on a one-for one basis, to

the phase-in percentages in later years.

However, they will still need to reach

100% of sales in the 2007 model year

(2009 for HLDTs). Manufacturers will

have the option to use this alternative to

meet phase-in requirements for LDV/

LLDTs and/or HLDTs. They can use

separate alternative phase-in schedules

for exhaust and evaporative emissions,

or an alternative phase-in schedule for

one set of standards and the primary

(25/50/75/100% or 50%/100%)

schedule for the other.

Under these alternative schedules,

manufacturers will have to introduce

vehicles that meet or surpass the 0.07 g/

mi Tier 2 NOX average standard before

they are required to do so, or else

introduce vehicles that meet or surpass

the 0.07 standard in greater quantities

than required. Alternative phase-in

schedules essentially credit the

manufacturer for its early or accelerated

efforts and allow the manufacturer

greater flexibility in subsequent years

during the phase-in. Thus, the

alternative phase-in schedule provisions

provide incentive and flexibility to

manufacturers to introduce Tier 2

vehicles before 2004 (or 2008 for

HLDTs).

As outlined in the NPRM, an

alternative phase-in schedule will be

acceptable if it passes a specific

mathematical test. We have designed

the test to provide manufacturers benefit

from certifying to the Tier 2 standards

early while ensuring that significant

numbers of Tier 2 vehicles are

introduced during each year of the

alternative phase-in schedule. To test an

alternative schedule, a manufacturer

Federal Register / Vol. 65, No. 28 / Thursday, February 10, 2000 / Rules and Regulations 6743

68For interim vehicles, this average NOX standard

will be 0.20 for HLDTs and 0.30 for LDV/LLDTs.

Compliance with these interim average standards will be calculated in the same manner as

compliance with the 0.07 standard.

must sum its yearly percentages of Tier

2 vehicles beginning with model year

2001 and compare the result to the sum

that results from the primary phase-in

schedule. If an alternative schedule

scores as high or higher than the base

option, then the alternative schedule is

acceptable. The mathematical technique

to evaluate alternative phase-in schemes

is somewhat similar to that used in our

NLEV rule and in California rules.

For LDV/LLDTs, the final sum of

percentages must equal or exceed 250—

the sum that results from a 25/50/75/

100 percent phase-in. For example, a

10/25/50/65/100 percent phase-in that

begins in 2003 will have a sum of 250

percent and is acceptable. In this

example, assuming constant levels of

production, each Tier 2 vehicle sold

early (i.e. in 2003) will permit the

manufacturer to sell one less Tier 2

vehicle in the last phase-in year (2006).

A 10/20/40/70/100 percent phase-in

that begins the same year has a sum of

240 percent and is not acceptable. For

HLDTs, the sum must equal or exceed

150 percent.

To ensure that significant numbers of

Tier 2 vehicles are introduced in the

2004 time frame, manufacturers will not

be permitted to use alternative phase-in

schedules that delay the

implementation of the Tier 2 LDV/LLDT

requirements, even if the sum of the

phase-in percentages meets or exceeds

250. Such a situation could occur if a

manufacturer delayed implementation

of its Tier 2 production until 2005 and

began a 75/85/100 percent phase-in that

year. To protect against this possibility,

we are finalizing the proposed

requirement that for any alternative

phase-in schedule, a manufacturer’s

phase-in percentages from the 2004 and

earlier model years sum to at least 25%.

In the final rule we are including an

additional measure of flexibility to the

requirements for alternative phase-in

schedules. We will permit

manufacturers to achieve a 2004 phasein of less than 25%, but no less than

20%, provided that in 2005 they make

up the shortfall in a two-for-one

manner. So, as an example, a

manufacturer that phased in 5% in 2003

and 15% in 2004 would achieve a total

of 20% through the 2004 model year

and would need to comply with Tier 2

requirements for at least 60% of its

LDV/LLDTs in 2005. We believe that

this flexibility is appropriate because

the required response for 2005 model

year vehicles more than makes up for

the environmental loss from the 2004

model year vehicles.

We requested comment on whether

alternative phase-in schedules should

be structured to permit manufacturers to

extend phase in past the final year of the

primary phase-in schedule (2007 or

2009). While the Alliance proposal and

comments clearly support phase-ins that

run past 2007 and 2009, other

commenters were opposed to any

extensions of the phase-in period. In

fact most commenters who addressed

the length of the phase-in indicated, as

previously discussed, that the phase-in

for HLDTs should be moved ahead to

2007 to coincide with LDV/LLDTs. We

are not finalizing any provisions that

will permit alternative phase-in

schedules to provide additional time for

manufacturers to meet any final 100%

compliance year.

In the NPRM, we pointed out that

phase-in schedules, in general, add little

flexibility for manufacturers with

limited product offerings because a

manufacturer with only one or two test

groups can not take full advantage of a

25/50/75/100 percent or similar phasein. For manufacturers meeting EPA’s

definition of ‘‘small volume

manufacturer,’’ we proposed to exempt

those manufacturers from the phase-in

schedules and require them to simply

comply with the final 100% compliance

requirement. We are finalizing this

provision for small volume

manufacturers. This provision is only

intended to apply to small volume

manufacturers and not to small test

groups of larger manufacturers.

For larger manufacturers having a

limited product line, we recognize that

our phase-in schedule may lack

flexibility, however, we are not

including any provisions to address this

issue as we are for small volume

manufacturers because we do not

believe these manufacturers need the

relief and we do not want to sacrifice

any air quality benefits of the program.

c. Manufacturers Will Meet a ‘‘Corporate

Average’’ NOX Standard

While the manufacturer will be free to

certify a test group to any applicable bin

of standards in Table IV.B.–2, it will

have to ensure that the sales-weighted

average of NOX standards from all of its

test groups of Tier 2 vehicles meet a full

useful life standard of 0.07 g/mi.68

Using a calculation similar to that for

the NMOG corporate average standard

in the California and NLEV programs,

manufacturers must determine their

compliance with the corporate average

NOX standard at the end of the model

year by computing a sales weighted

average of the full useful life NOX

standards from each bin. Manufacturers

must use the following formula:

Corporate total Tier Average NO Tier 2 NO std for each bin) (sales for each bin)

 sales X

X = ∑( ×

2

Manufacturers must exclude vehicles

sold in California or states adopting

California LEV II standards from the

calculation. As indicated above,

manufacturers must compute separate

NOX averages for LDV/LLDTs and

HLDTs through model year 2008.

The corporate average NOX standards

of the primary Tier 2 program and the

interim programs for LDV/LLDTs and

HLDTs will ensure that expected fleetwide emission reductions are achieved.

At the same time, the corporate average

standards allow us to permit the sale of

some vehicles above the levels of the

average standards to address the greater

technological challenges some vehicles

face and to reduce the overall costs of

the program. We discuss how

manufacturers can generate, use, buy

and sell NOX credits under the interim

and Tier 2 programs in the next

subsection.

Given the corporate average NOX

standards, we do not believe a corporate

average NMOG standard as used by

California is essential because meeting

the corporate average NOX standard will

automatically bring the NMOG fleet

average to approximately 0.09 g/mi or

below.

d. Manufacturers Can Generate, Bank,

and Trade NOX Credits

i. General Provisions

As mentioned in the Overview above,

we are finalizing our proposal that

manufacturers with year-end corporate

average NOX emissions for their Tier 2

vehicles below 0.07 g/mi can generate

Tier 2 NOX credits. Credits can be saved

(banked) for use in a future model year

6744 Federal Register / Vol. 65, No. 28 / Thursday, February 10, 2000 / Rules and Regulations

or for trading (sale) to another

manufacturer. Manufacturers can use

credits if their corporate average NOX

emissions are above 0.07 g/mi.

As proposed, the Tier 2 standards will

apply regardless of the fuel the vehicle

is designed for, and there will be no

restrictions on averaging, banking or

trading of credits across vehicles of

different fuel types. Consequently, a

gasoline fueled LDV might help a

manufacturer generate NOx credits in

one year that could be banked for the

next year when they could be used to

average against NOX emissions of a

diesel fueled LDT within the

appropriate averaging structure.

Because of the split phase-in and the

different interim programs we are

finalizing for the two different groups of

vehicles (LDV/LLDTs and HLDTs), we

are also finalizing the proposed

requirement that manufacturers

compute their corporate Tier 2 NOX

averages separately for LDV/LLDTs and

HLDTs through 2008. As we proposed,

credit exchanges between LDVs/LLDTs

and HLDTs will not be allowed nor will

credit exchanges across the interim

programs or between the interim

programs and the final Tier 2 program

be allowed. These restrictions will end

with the 2009 model year at which time

both phase-ins and all interim standards

will have ended and the program will

permit free averaging across all Tier 2

vehicles. As noted in the NPRM, we are

concerned that allowing cross-trading

between interim and Tier 2 vehicles will

reduce the expected benefits of the

program and delay fleet turnover to Tier

2 emission levels. For this reason we

did not propose and are not finalizing

to permit such exchanges.

ii. Averaging, Banking, and Trading of

NOX Credits Fulfills Several Goals

We explained in the NPRM why we

believe the provisions for averaging,

banking, and trading of NOX credits

(ABT) will be valuable. In short:

• An ABT program is an important

factor that EPA takes into consideration

in setting emission standards that are

appropriate under section 202 of the

Clean Air Act. ABT allows us to

consider a more stringent emission

standard than might otherwise be

appropriate under the CAA, since ABT

reduces the cost and improves the

technological feasibility of achieving the

standard;

• ABT enhances the technological

feasibility and cost effectiveness of the

proposed standard and allows the

standard to be attainable earlier than

might otherwise be possible;

• ABT provides manufacturers with

additional product planning flexibility

and the opportunity for a more cost

effective introduction of product lines;

• ABT creates incentive for early

introduction of new technology,

allowing certain engine families to act

as trail blazers for new technology;

We view the ABT provisions in

today’s rule as environmentally neutral

because the use of credits by some

vehicles is offset by credits generated by

other vehicles. However, when coupled

with the new standards, ABT will have

environmental benefits because it

allows the new standards to be

implemented earlier than would

otherwise be appropriate.

iii. How Manufacturers Can Generate

and Use NOX Credits

Manufacturers will determine their

year-end corporate average NOX

emission level by computing a salesweighted average of the NOX standard

from each bin to which the

manufacturer certifies any LDVs or

LDTs. Tier 2 NOX credits will be

generated when a manufacturer’s

average is below the 0.07 gram per mile

corporate average NOX standard,

according to this formula:

NOX Credits=(0.07 g/mi¥Corporate

Average NOX)×Sales

The manufacturer can use these NOX

credits in future years if its corporate

NOX average is above 0.07, or it can

trade (sell) the credits to other

manufacturers. Tier 2 credits can be

generated via this mechanism beginning

in the first phase-in year, i.e., 2004 for

LDV/LLDTs and 2008 for HLDTs. The

use of NOX credits will not be permitted

to address Selective Enforcement

Auditing or in-use testing failures.

The enforcement of the NOX

averaging standard will occur through

the vehicle’s certificate of conformity. A

manufacturer’s certificate of conformity

will be conditioned upon compliance

with the averaging provisions. The

certificate will be void ab initio if a

manufacturer fails to meet the corporate

average NOX standard and does not

obtain appropriate credits to cover its

shortfall in that model year or in the

next three model years (see deficit

carryforward provision below).

Manufacturers will need to track their

certification levels and sales unless they

produce only vehicles certified to bins

containing NOX levels of 0.07 g/mi or

below and do not plan to bank NOX

credits.

iv. Manufacturers Can Earn and Bank

Credits for Early NOX Reductions

In the NPRM, we proposed that to the

extent a manufacturer’s corporate

average NOX level of its ‘‘early Tier 2’’

vehicles was below 0.07 g/mi, the

manufacturer could bank NOX credits

for later use. We recognize (and the

comments assert) that this provision

may be lightly used, because it requires

a large reduction from prior standards to

produce any credits. However, our goal

is to bring vehicles to Tier 2 levels as

quickly as possible and we are

concerned that any other approach

could provide credits for reductions

manufacturers would make relatively

easily from previous, higher standards.

Such credits would then be used to

delay the impact of the 0.07 g/mi NOX

standard. Further, we believe that our

provision for alternative phase-in

schedules provides what is essentially a

supplemental, or perhaps even primary,

early banking program, in that it permits

manufacturers to trade-off earlier phasein percentages for later phase-in

percentages. To provide manufacturers

with greater flexibility and with

incentives to certify, produce and sell

Tier 2 vehicles as early as possible, we

are finalizing the alternative phase-in

provisions. (See IV.B.4.b.ii above.)

Under such schedules, a manufacturer

can certify vehicles to an average NOX

level of 0.07 g/mi or below in years

prior to the first required phase-in year

and then phase its remaining vehicles in

over a more gradual phase-in schedule

that will still lead to 100% compliance

by 2007 (2009 for HLDTs).

Thus, we are finalizing our provision

for early NOX credits essentially as

proposed. To the extent that a

manufacturer’s corporate average NOX

level of its ‘‘early Tier 2’’ vehicles is

below 0.07 g/mi, the manufacturer can

bank NOX credits for later use.

Manufacturers will compute these early

credits by calculating a sales-weighted

corporate average NOX emission level of

their Tier 2 vehicles, as in the basic Tier

2 program described above. In section

IV.B.4.d.vii. below, we describe

provisions we are adding to the final

rule that will enable manufacturers to

generate extra credits from vehicles

certified to very low levels. In addition

to encouraging production of very clean

vehicles, these provisions, which apply

beginning in 2001, will enhance the

abilities of manufacturers to generate

early credits.

Early Tier 2 credits will have all the

same properties as credits generated by

vehicles subject to the primary phase-in

schedule. We proposed that these

credits could not be used in the NLEV,

Tier 1 or interim program for non-Tier

2 vehicles in any way. We are finalizing

this restriction as proposed. We are also

finalizing as proposed that the NMOG

emissions of these vehicles (LDVs and

LLDTs only) can be used in the

Federal Register / Vol. 65, No. 28 / Thursday, February 10, 2000 / Rules and Regulations 6745

69Because of the limited duration of the interim

programs, we proposed that a manufacturer could

carry a credit deficit in the interim program forward

until the 2006 model year (2008 for HLDTs). The

interim program, in its entirety, lasts only five years

and therefore we saw little risk of prolonged

deficits.

calculation of the manufacturer’s

corporate average NMOG emissions

under NLEV through 2003.

To provide manufacturers with

maximum flexibility in the period prior

to 2004, when LDV/LLDT useful lives

will still be at 100,000 miles, we

proposed and are finalizing that

manufacturers may choose between the

Tier 2 120,000 mile useful life or the

current 100,000 mile useful life

requirement for early Tier 2 LDV/

LLDTs. (HLDTs already have a 120,000

mile useful life.) Early LDV/LLDT NOX

credits for 100,000 mile useful life

vehicles will have to be prorated by

100,000/120,000 (5/6) so that they can

be properly applied to 120,000 mile Tier

2 vehicles in 2004 or later.

We proposed to restrict early banking

of HLDT Tier 2 NOX credits to the four

year period from 2004–2007. This

restriction was due to a concern about

excessive credits generation if a longer

credit generation period was available.

Based on our review of the comments

and from reconsideration of the

restrictive nature of our approach for

early credits, we are much less

concerned that allowing generation of

early HLDT Tier 2 credits in years prior

to 2004 will result in excessive credits.

Prior to 2004, manufacturers will only

be required to meet the Tier 1 standards

which are much higher than the final

Tier 2 standards. Manufacturers will

have to make large cuts in emissions to

bank the small amount of credits offered

by our early banking provision. Further,

we recognize that vehicles that meet the

Tier 2 standards early provide an

environmental benefit, and the earlier

that benefit occurs, the earlier that areas

can use such benefits to reach or come

close to attainment. Lastly, we believe it

is appropriate to match the period of

early credit generation with the years in

which we will permit alternative phasein schedules. Consequently, we are

finalizing our provisions for early

banking such that manufacturers may

bank early Tier 2 NOX credits in model

years 2001–2007.

We recognize that vehicles generating

early Tier 2 NOX credits may be doing

so without the emissions benefit of low

sulfur fuel, and thus these vehicles may

not achieve the full in-use emission

reduction for which they received

credit. When these credits are used to

permit the sale of higher-emitting

vehicles, there may be a net increase in

emissions. For the most part, this is a

problem anyway, since NLEV vehicles

are also sensitive to gasoline sulfur. We

believe that the benefits of early

introduction of Tier 2 technology

described above are significant enough

that they are worth the risk of some

emission losses that might occur if and

when the early credits are used. Also,

we believe that some fuel sulfur

reductions will occur prior to 2004 as

refiners upgrade their refineries or bring

new refining capacity on stream in

anticipation of the 2004 requirements

and take advantage of the phase-in

proposed in the gasoline sulfur ABT

program (described in Section IV.C.

below).

v. Tier 2 NOX Credits Will Have

Unlimited Life

We discussed in the preamble to the

NPRM why we did not propose to apply

the California schedule of discounting

unused credits adopted for NMOG

credits in the NLEV program. This

schedule serves to limit credit life

throughout the program by reducing

unused credits to 50, 25 and 0 percent

of their original number at the end of

the second, third and fourth year,

respectively, following the year in

which they were generated. We agree

that such a scheme may be appropriate

in the California program with its

declining NMOG average standard, but

in the federal program, once the phasein period ends in model year 2009, all

LDVs and LDTs will comply on average

with a fixed Tier 2 NOX standard.

Credits allow manufacturers

flexibility to meet standards cost

effectively and to address unexpected

shifts in sales mix. When matched with

a NOX average standard, credits provide

flexibility constrained by the

requirement that all vehicles, on

average, must comply with a fixed

standard. Defined bins of standards

prevent any one vehicle from having

extremely high emissions, while the

need to offset higher vehicles with

lower vehicles to meet an average NOX

standard prevents large numbers of

vehicles from utilizing the higher bins.

We requested comment in the NPRM

on the need for discounting of credits or

limits on credit life and what those

discount rates or limits, if any, should

be. The 0.07 NOX emission standard in

the Tier 2 program is quite stringent and

does not present easy opportunities to

generate credits. The degree to which

manufacturers invest the resources to

achieve extra NOX reductions provides

environmental benefit for years to come

and it is appropriate that the

manufacturer get credits. We do not

want to take measures to reduce the

incentive for manufacturers to bank

credits nor do we want to take measures

to encourage unnecessary credit use.

Consequently we are finalizing our

proposal that Tier 2 NOX credits,

including early credits, have unlimited

lives.

vi. NOX Credit Deficits Can Be Carried

Forward

When a manufacturer has a NOX

deficit at the end of a model year—that

is, its corporate average NOX level is

above the required corporate average

NOX standard—we proposed that the

manufacturer could carry that deficit

forward into the next model year. Such

a carry-forward could only occur after

the manufacturer used any banked

credits. If the deficit still existed and the

manufacturer chose not to or was unable

to purchase credits, the deficit could be

carried over. At the end of that next

model year, according to our proposal,

the deficit would need to be covered

with an appropriate number of NOX

credits that the manufacturer generated

or purchased. Any remaining deficit

would be subject to an enforcement

action. To prevent deficits from being

carried forward indefinitely, the

manufacturer would not be permitted to

run a deficit for two years in a row.69

Manufacturers made the persuasive

case that by the time they can tabulate

their average NOX emissions for a

particular model year, the next model

year is likely well underway and it is

too late to make calibration, marketing

or sales mix changes to adjust that year’s

credit generation. Therefore, based upon

comments, we are finalizing a modified

approach to credit deficits such that a

manufacturer having a credit deficit in

the interim or Tier 2 program can carry

that deficit forward for a total of three

years, but the manufacturer must apply

all its available credits to that deficit on

a one-for-one basis in each of the first

two succeeding model years. If the

deficit is not covered by the third model

year, the manufacturer must apply

credits at a rate of 1.2:1. No deficit may

be carried into the fourth year. In order

to accommodate this modification to our

proposal, we must also modify our

proposed provision that would have

prevented manufacturers from running a

deficit in two consecutive model years

so that deficits can not be shifted from

one year to the next and thus carried

forward indefinitely. Because we are

permitting, in this final rule, deficits to

be carried forward for as long as three

years we are finalizing that

manufacturers can not run a deficit in

any year in which it is paying off a

deficit from a previous year. The effect

of this provision is the same as that in

6746 Federal Register / Vol. 65, No. 28 / Thursday, February 10, 2000 / Rules and Regulations

the NPRM— to keep manufacturers from

shifting deficits forward indefinitely.

We note that under our modified final

approach, manufacturers will have the

flexibility to carry deficits from the

interim program forward into the final

Tier 2 program. This feature is likely to

be used only in an extreme situation

since the Tier 2 credits needed to offset

the interim credit deficit will be more

difficult to generate. Consequently, we

do not believe this provision is

inconsistent with our approach of

segregating interim and Tier 2 credits. In

fact, manufacturers electing to cover an

interim credit deficit with Tier 2 credits

will likely have to accelerate the

introduction of Tier 2 vehicles to get the

necessary credits to cover the deficit.

We are finalizing that small volume

manufacturers may not use the credit

deficit carryforward provision until they

have been in compliance with the

relevant average NOX standard for one

model year. In section V of this

preamble we explain that we are not

requiring small volume manufacturers

to comply with intermediate phase-in

requirements under our interim or Tier

2 phase-ins. Rather, they will just have

to comply for all of their vehicles in the

last phase-in year. Because they do not

have to comply with intermediate

phase-in requirements, small volume

manufacturers effectively get more time

to comply (as much as three years). We

do not want to create a situation where

they could get even more time to

comply by using the credit deficit

carryforward provision.

vii. Encouraging the Introduction of

Ultra-Clean Vehicles

We requested comment in the NPRM

as to whether we should provide

additional NOX credits for vehicles that

certify to very low levels. We stated in

the NPRM that we believe it is

appropriate to provide inducements to

manufacturers to certify vehicles to very

low levels and that these inducements

may help pave the way for greater and/

or more cost effective emission

reductions from future vehicles. We

believe it is important in a rule of this

nature to provide extra incentive to

encourage manufacturers to produce

and market very clean vehicles. We

believe this is especially important in

the earliest years of the program when

manufacturers must make resource

commitments to technologies and

vehicle designs that will have multiyear life spans. We believe this program

provides a strong incentive for

manufacturers to maximize their

development and introduction of the

best available vehicle/engine emission

control technology, and this in turn

provides a stepping stone to the broader

introduction of this technology soon

thereafter. Early production of cleaner

vehicles enhances the early benefits of

our program and vehicles certified to

these lowest bins produce not just lower

NOX but also lower NMOG, CO and

HCHO emissions. If a manufacturer can

be induced to certify to a lower bin by

the promise of reasonable extra credits,

the benefits of that decision to the

program may last for many years.

We are finalizing provisions to permit

manufacturers, at the beginning of the

program, to weight LDV/Ts certified to

the lowest two bins more heavily when

calculating their fleet average NOX

emissions. Under this provision, which

applies through the 2005 model year,

manufacturers may apply a multiplier to

the number of LDV/Ts sold that are

certified to bins 1 and 2 (ZEVs and

SULEVs in California terms). This

adjusted number will be used in the

calculation of fleet average NOX

emissions for a given model year and

will allow manufacturers having

vehicles certified to these bins to

generate additional credits (or use fewer

credits) that year.

The multipliers that manufacturers

may use are found in Table IV.B.–8

below:

TABLE IV.B.–8.—MULTIPLIERS FOR ADDITIONAL CREDITS FOR BIN 1 AND 2 LDV/T

Bin Model year Multiplier

2 .................................................................................................. 2001, 2002, 2003, 2004, 2005 ................................................... 1.5

1 .................................................................................................. 2001, 2002, 2003, 2004, 2005 ................................................... 2.0

e. Interim Standards

i. Interim Exhaust Emission Standards

for LDV/LLDTs

The NLEV program referenced

throughout this discussion is a

voluntary program in which all major

manufacturers have opted to produce

LDVs and LLDTs to tighter standards

than those required by EPA’s Tier 1

regulations. Under the NLEV program,

manufacturers must meet an NMOG

average outside of California that is

equivalent to California’s current

intermediate-life LEV requirement—

0.075 g/mi for LDVs and LDT1s (0.10 g/

mi for LDT2s). NLEV requirements

apply only to LDVs and LLDTs, not to

HLDTs.

The NLEV program is effective

beginning in the northeastern states in

1999 and in the remaining states in

2001, except that the program does not

apply to vehicles sold in California or in

states that adopted California’s LEV

program. The program runs at least

through model year 2003 and can run

through model year 2005.

Under the Tier 2 phase-in we are

finalizing today, not all LDV/LLDTs

covered under NLEV will be subject to

Tier 2 standards in the 2004 to 2006

period. Without a program for full Tier

2 compliance in 2004 (i.e., because of

the phase-in), these vehicles could

revert to Tier 1 standards. The NLEV

program, moreover, is a voluntary

program that contains several provisions

that restrict EPA’s flexibility and that

could lead to a manufacturer or a

covered Northeastern state leaving the

program in or prior to 2004. To resolve

these concerns we are finalizing the

proposed interim program for all nonTier 2 LDV/LLDTs for the 2004–2006

model years. Our interim program will

replace the NLEV program, which will

terminate at the end of 2003. The

transition from NLEV to the interim

program should be smooth because the

interim program will employ several

bins derived from the NLEV standards

for LDVs, LDT1s and LDT2s. The

interim program will ensure that all

LDVs, LDT1s and LDT2s that are not

certified to Tier 2 levels during the

2004–2006 phase-in period remain at

levels at least as stringent, on average,

as NLEV levels. The interim program

will also bring the emission standards

for LDT2s more into line with those for

the LDVs and LDT1s by requiring that

they be averaged under the same NOX

standard rather than under separate

standards as is the case in the NLEV

program.

In the NPRM, we included separate

sets of bins for the interim program and

Tier 2 program. However, we indicated

that manufacturers could use either set

for interim vehicles. In today’s final rule

we have combined all bins into one

table for simplicity. We have also added

two new bins having NOX values of 0.03

g/mi and 0.10 g/mi.

Federal Register / Vol. 65, No. 28 / Thursday, February 10, 2000 / Rules and Regulations 6747

In the NPRM, we proposed that, for

LDV/LLDTs, all bins with NOX values

over 0.20 g/mi would expire at the end

of the 2006 model year when there are

no longer any interim LDV/LLDTs.

Table IV–B.–4 shows that the two

highest bins, bins 9 and 10, which were

derived from NLEV and included to

smooth the transition from NLEV to the

interim program will be unuseable for

LDV/LLDTs after 2006—the last year of

the LDV/LLDT phase-in. Otherwise all

bins will remain viable for the duration

of the Tier 2 program unless altered by

another rulemaking.

We proposed to align the useful life

periods for interim standards with those

of the Tier 2 standards (full useful life

of 120,000 miles), as discussed in

Section V.B. below. The end result of

this proposal would have been that all

LDV/LLDTs—whether in the Tier 2

program or interim program—would go

from 100,000 mile useful lives to

120,000 mile useful lives in 2004.

However, manufacturers were extremely

concerned about the certification

workload burden for 2004. They

commented that they would be unable

to carry any of their LDV/LLDTs over

from 2003 and that they would have to

recertify all of their vehicles in 2004 and

then likely recertify them again as they

were phased into the Tier 2 standards.

Therefore, based upon comments, we

are finalizing that useful lives of the

interim LDV/LLDTs may remain at

100,000 miles. Our reasons for this

change are discussed in greater detail in

Section V.B.

We are finalizing as proposed a

corporate average full useful life NOX

standard of 0.30 g/mi for this interim

program. This standard is derived from

the NLEV program and represents the

full useful life NOX standard in NLEV

that is associated with LEV LDVs and

LDT1s. LDVs and LDT1s will already be

at this level, on average, under the

NLEV program. LDT2s are subject to

standards that effectively impose a NOX

average standard of 0.5 g/mi under

NLEV, but we believe they should

readily be able to meet the 0.30 g/mi

average especially since they can be

averaged with the LDVs and LDT1s. To

aid LDV/LLDTs in meeting the 0.30 g/

mi corporate average NOX standard in

the interim program, we are providing

an optional NMOG value for LDT2s

certifying to bin 9 (where the NOX

standard=0.3 g/mi). This option is only

for LDT2s, and only for those produced

by manufacturers that elect to comply

with the interim requirements for all of

their HLDTs for the 2004 model year

(see next section). The optional NMOG

values for qualifying LDT2s are 0.130 g/

mi at full useful life and 0.100 at

intermediate useful life.

The 0.30 g/mi corporate average NOX

standard will apply only to non-Tier 2

(interim) LDV/LLDTs and only for the

2004–2006 model years. Manufacturers

will compute, bank, average, trade,

account for, and report interim NOX

credits via the same processes and

equations described in this preamble for

Tier 2 vehicles, substituting the 0.30 g/

mi corporate average standard for the

0.07 g/mi corporate average standard in

the basic program. Also, EPA will

condition the certificates of conformity

on compliance with the corporate

average standard, as described for Tier

2 vehicles. These NOX credits will be

good only for the 2004–2006 model

years and will only apply to the interim

non-Tier 2 LDV/LLDTs. Credits will not

be subject to any discounts, and credit

deficits can be carried forward as

described under Section IV.B.4.d.vi.

above.

NMOG credits from the NLEV

program can not be used in this interim

program in any way. NOX credits

generated under this interim program

will not be applicable to the Tier 2 NOX

average standard of 0.07 g/mi because of

our concern that a windfall credit

situation could occur. This could

happen because credits are relatively

easy to generate under a 0.30 g/mi

standard compared to generating credits

under a 0.07 g/mi standard. As we

indicated in the preamble to the NPRM

we believe the application of credits

earned under the interim standard to the

Tier 2 standards could significantly

delay the fleet turnover to Tier 2

vehicles. We do not believe there is a

need or that it would be appropriate to

allow such a delay. The requirements of

the interim program will be monitored

and enforced in the same fashion as for

Tier 2 vehicles.

For the reasons cited above, we

believe it is appropriate to extend

interim, NLEV-like standards beyond

2003 as a mandatory program and to

bring all LDVs and LLDTs within its

scope. Manufacturers have already

demonstrated their ability to make LDVs

and LLDTs that comply at levels well

below these standards. As the interim

standards for LDV/LLDTs are essentially

‘phase-out’’ standards, we did not

propose and are not finalizing early

banking provisions for the interim LDV/

LLDTs.

ii. Interim Exhaust Emission Standards

for HLDTs

We believe these interim standards

are necessary and reasonable for HLDTs.

While these trucks make up a fairly

small portion of the light-duty fleet

(about 14%), their current standards

under Tier 1 are far less stringent than

the NLEV standards that apply to

current model year LDVs and LLDTs.

Given the delayed phase-in we are

finalizing for HLDTs, we believe it is

appropriate to require some interim

reductions from these vehicles. Further,

manufacturers have already

demonstrated their ability to meet these

interim standards with HLDTs. These

standards are a reasonable first step

toward the Tier 2 program and will

provide meaningful reductions in the

near term relative to current

certification levels under the Tier 1

emission standards.

We also proposed interim standards

to begin in 2004 for HLDTs. These

vehicles are not included in the NLEV

program and will be subject only to the

Tier 1 standards prior to today’s rule

taking effect. Tier 1 standards permit

NOX emissions of 0.98 g/mi for LDT3s

and 1.53 g/mi for LDT4s. We are

finalizing these standards generally as

proposed; to address statutory lead time

requirements, we are offering two

options for the phase-in of HLDTs to the

interim standards. Manufacturers can

choose between either of these two

options:

(Option 1) Like we proposed in the

NPRM, manufacturers must bring their

entire production of 2004 model year

HLDTs under the interim requirements

and phase 25% of them into the 0.20 g/

mi fleet average NOX requirement,

followed by 50% in 2005, 75% in 2006,

and then 100% in 2007; or

(Option 2) We are including this

option to address statutory lead time

requirements for HLDTs. In the case of

2004 model year test groups whose

model years commence before the

fourth anniversary of the signature date

of today’s rule, the manufacturer may

exclude those test groups from the

interim HLDT provisions of the rule. In

the case of 2004 model year test groups

whose model years commence on or

after the fourth anniversary of this rule’s

signature, the manufacturer must bring

all such HLDTs under the requirements

of our interim program, and all such

vehicles or 25% of the manufacturer’s

sales of 2004 model year HLDTs,

whichever is less, must comply with the

corporate average NOX standard of 0.20

g/mi. The manufacturer must then bring

all of its HLDTs into the interim

requirements beginning with the 2005

model year including a 50%, 75%,

100% phase-in to the 0.20 g/mi fleet

average NOX standard beginning that

year. The beginning of a test group’s

model year is determined under section

202(b)(3) of the Act and 40 CFR Part 85

Subpart X.

6748 Federal Register / Vol. 65, No. 28 / Thursday, February 10, 2000 / Rules and Regulations

70Manufacturers must cite this declaration in

their LDT2 certification applications for the 2004–

2006 model years and in their LDT4 applications

for the 2004–2008 model years. If manufacturers

employ alternate phase-in schedules that begin

prior to 2004, they must also make the declaration

in each applicable year before 2004.

Our final rule is consistent with the

requirements of the Act because

manufacturers won’t have to phase-in

HLDTs until the model year that

commences four years from the

signature of this rule if they don’t want

to. However, to provide incentive for

manufacturers to comply with the

interim requirements for all of their

HLDTs beginning with the 2004 model

year, i.e. to elect Option 1, we are

finalizing a provision to permit those

manufacturers to use higher NMOG

values in two situations. Manufacturers

electing to meet the interim

requirements for all of their 2004 model

year HLDTs including the 25% phase-in

number must so declare in their 2004

model year HLDT certification

applications. They may then:

• Use a full useful life NMOG value,

through the 2008 model year, of 0.280

g/mi for LDT4s certified to bin 10 (0.195

g/mi at intermediate life); and

• Use a full useful life NMOG value,

through the 2006 model year, of 0.130

g/mi for LDT2s certified to bin 9 (0.100

g/mi at intermediate life). 70

In the case of the LDT4s, the optional

NMOG standard will enable

manufacturers to more easily meet our

interim HLDT NOX standards, the

highest of which (0.6 g/mi) is one-third

tighter than what will be required in

California under Cal LEV I through

2006. For the LDT2s, the optional

NMOG standard will help

manufacturers certify more LDT2s to bin

9 (0.3 g/mi) than they likely would

otherwise (they would probably certify

some LDT2s to bin 10 where NOX=0.6

g/mi). Therefore, both of these optional

standards are consistent with our goal to

achieve important early NOX benefits

from our program.

Except for the application of the new

option described above, the interim

standards for HLDTs will apply as

proposed, and will phase-in through the

2007 model year, as shown in Table

IV.B.–2. We are finalizing the proposed

corporate average full-life NOX standard

of 0.20 g/mi for interim HLDTs.

Manufacturers will comply with the

corporate average HLDT NOX standard

by certifying their interim HLDTs to any

of the full useful life bins shown in

Table IV–B.–4. Where applicable,

manufacturers will also comply with the

intermediate useful life standards

shown in Table IV.B.–5. Interim HLDTs

not needed to meet the phase-in

percentages during model years 2004–

2006 will have to be certified to the

standards of one of the bins in Table

IV.B.–4 (and –5), and NOX will thus be

capped at 0.60 g/mi. These trucks will

not be included in the calculation to

demonstrate compliance with the 0.20

g/mi average.

At the end of each model year,

manufacturers will determine their

compliance with the 0.20 NOX standard

by calculating a sales weighted average

of all the bins to which they certified

any interim HLDTs, excluding those not

needed to meet the applicable phase-in

requirements during 2004–2006. The

excluded trucks must comply with the

standards from one of the bins in Table

IV-B–4 (and –5) which effectively caps

their emissions at 0.60 g/mi.

For HLDT test groups that are not

subject to the phase-in in model year

2004 under Option 2 above, the same

requirements as described above apply

except that there are no new standards

for these vehicles in the 2004 model

year. Also, the optional higher NMOG

values for LDT2s and LDT4s do not

apply for any manufacturer that uses

Option 2.

Given that the interim HLDT

standards are ‘‘phase-in’’ standards

through 2007 (as opposed to the interim

LDV/LLDT standards, which are

‘‘phase-out’’ standards), we are

including provisions that manufacturers

may employ alternative phase-in

schedules as proposed for the Tier 2

standards and described in detail in

section IV.B.4.b.ii. of this preamble.

These schedules provide manufacturers

with greater flexibility and we believe

they also provide incentive for

manufacturers to introduce advanced

emission control technology at an

earlier date. Alternative phase-in

schedules will have to provide 100%

phase-in by the same year as the

primary phase-in schedule (2007).

Manufacturers will be eligible for

alternate phase-in schedules to the

extent that they produce HLDTs that

meet or surpass the NOX average

standard for interim HLDTs of 0.20 g/mi

in 2001–2003 or to the extent that they

produce more HLDTs than required that

meet the 0.20 average standard in 2004

or later.

Where manufacturers elect not to

meet the phase-in requirements for all of

their 2004 model year HLDTs, as

discussed above under Option 2, they

may still employ alternate phase-in

schedules, but the sum of 225 percent

is required rather than the 250 percent

required for alternate phase-ins

described in section IV.B.4.b.ii. In this

case, the sum of phase-in percentages

up through the 2005 model year must

total to at least 50%. Also,

manufacturers must raise the 225%

value to the extent that any of their 2004

HLDTs’ model years commence on or

after the fourth anniversary of the

signature date of this rule and are

brought into compliance with the 0.20

g/mi average NOX standard.

Lastly, note that for bin 10, which is

only usable during the interim program,

we have established a PM standard of

0.08 g/mi, which is more stringent than

the Tier 1 standard previously in effect

for these vehicles. We do not expect low

sulfur diesel fuel to be widely available

during the time frame of the interim

program but we expect that bin 10 levels

can be reached by diesel technology on

current diesel fuel. As a part of this

overall approach, we are making the

intermediate life standards optional for

diesels for this bin.

f. Light-Duty Evaporative Emission

Standards

We are finalizing as proposed a set of

more stringent evaporative emission

standards for all Tier 2 light-duty

vehicles and light-duty trucks. The

standards we are finalizing are shown in

Table IV.B.–9 and represent, for most

vehicles, more than a 50% reduction in

diurnal plus hot soak standards from

those that will be in effect in the years

immediately preceding Tier 2

implementation. The higher standards

for HLDTs provide allowance for greater

non-fuel emissions related to larger

vehicle size.

Federal Register / Vol. 65, No. 28 / Thursday, February 10, 2000 / Rules and Regulations 6749

71The heavy-duty definition also includes

vehicles that weigh over 6000 lbs curb weight

regardless of their GVWR. We are not aware that

any vehicles currently produced have curb weights

above 6,000 lbs, but GVWRs of 8,500 lbs or less.

Nevertheless, this discussion and our requirements

includes such vehicles.

TABLE IV.B.–9.—FINAL EVAPORATIVE EMISSION STANDARDS

[Grams per test]

Vehicle class 3 day diurnal

+hot soak

Supplemental

2 day diurnal

+hot soak

LDVs and LLDTs ................................................................................................................................................... 0.95 1.2

HLDTs .................................................................................................................................................................... 1.2 1.5

Evaporative emissions from LDVs and

LDTs represent nearly half of the light

duty VOC inventory projected for the

2007–2010 time frame, according to

MOBILE5 projections. Manufacturers

are currently certifying to levels that are,

on average, about half of the current

standards, and in many cases, much less

than half the standards. Thus, meeting

these standards appears readily feasible.

Even though manufacturers are already

certifying at levels much below the

current standard, we believe that

reducing the standards will result in

emission reductions as all

manufacturers seek to certify with

adequate margins to allow for in-use

deterioration. Further, we believe that

tighter standards will prevent

‘‘backsliding’’ toward the current

standards as manufacturers pursue cost

reductions.

As mentioned in section IV.B.–4.b

above, we will phase in the Tier 2

evaporative standards by the same

mechanism as the Tier 2 exhaust

standards; e.g., 25/50/75/100 percent

beginning in 2004 for LDV/LLDTs and

50/100 percent beginning in 2008 for

HLDTs (as shown in Table IV.B.–2). As

for the exhaust standards, alternative

phase-in plans will also be available.

The evaporative emission standards

we proposed and are finalizing today

are the same as those that

manufacturers’ associations proposed

during the development of California’s

LEV II proposal. California ultimately

opted for more stringent standards; we

believe that our standards are

appropriate for federal vehicles certified

on higher-volatility federal test fuel.

g. Passenger Vehicles Above 8,500

Pounds GVWR

Historically, we have categorized all

vehicles above 8,500 pounds GVWR as

heavy-duty vehicles regardless of their

application and they have been subject

to standards and test procedures

designed for vehicles used in heavier

work applications. 71 In the Tier 2

NPRM, we requested comment on

whether some portion of vehicles above

8,500 pounds GVWR should be

included in the Tier 2 program, based

on vehicle use or design characteristics.

The Tier 2 proposals, however, applied

to light-duty vehicles and light-duty

trucks and did not cover any vehicles

above 8,500 pounds GVWR.

On October 29, 1999, after carefully

considering all of the comments on this

issue, we proposed to include all

personal use passenger vehicles (both

gasoline and diesel fueled) between

8,500 and 10,000 pounds GVWR in the

Tier 2 program. This group of vehicles

would include large SUVs and

passenger vans and may include other

types of ‘‘crossover’’ multipurpose

vehicles in the future, depending on

new vehicle designs. We proposed this

Tier 2 program change in our NPRM

concerning emissions standards for

2004 and later heavy-duty vehicles and

engines, (64 FR 58472).

Specifically, we proposed to revise

the definition of light-duty truck to

include any complete vehicle between

8,500 and 10,000 pounds GVWR that is

designed primarily for the

transportation of persons and has a

capacity of not more than 12 persons.

We expected that this definition would

exclude vehicles that have been

designed for a legitimate work function

as their primary use, such as the largest

pick-up trucks, the largest passenger

vans, and cargo vans; these vehicles

would continue to be categorized as

heavy-duty and would be subject to

applicable heavy-duty standards. We

requested comment on whether the

proposed definition would adequately

exclude these vehicles, or whether

additional criteria may be needed and

how that criteria might be used.

Today, we are finalizing Tier 2

standards for passenger vehicles above

8,500 pounds GVWR. These vehicles are

included in the Tier 2 program

beginning in 2004 and are required to

meet the final Tier 2 standards in 2009

and later. As we intended in the

proposal, these vehicles will generally

be subject to the same requirements as

HLDTs. We have made modifications to

the program, primarily in response to

comments we received in two areas: (1)

Changing the definition of light-duty

truck and (2) the interim program

requirements.

New Vehicle Category: Medium-Duty

Passenger Vehicles (MDPVs)

The mechanism we proposed to bring

the passenger vehicles over 8,500

pounds into the Tier 2 program, was to

modify the definition of light-duty truck

to include those vehicles. The objective

of this proposal was to have these

vehicles treated as HLDTs within Tier 2.

We are finalizing requirements which

remain consistent with our objective of

including these vehicles in Tier 2

beginning in 2004. However, the

approach we are finalizing is somewhat

different than that proposed.

Rather than finalizing the revised

definitions for light-duty truck as we

proposed, we are creating a new

category of heavy-duty vehicles termed

‘‘medium-duty passenger vehicles’’

(MDPVs). These vehicles will generally

be grouped with and treated as HLDTs

in the Tier 2 program. The MDPV

category is defined along the lines of the

proposed definition change for the LDT

category, with some modification, as

described below. Our decision to create

a new sub-category of heavy-duty

vehicles rather than modify the existing

LDT definition does not, in and of itself,

change the way in which Tier 2

standards are applied to the vehicles.

We decided upon the above approach

because section 216 of the CAA

establishes the definition for LDT as

having the meaning contained in the

CFR as of 1990. We received several

comments that EPA may not change the

definition and must instead devise a

way to categorize the vehicles for

purposes of Tier 2 which does not

change the definition of light-duty

truck. Rather than adopt a change to the

LDT definition that would be

questionable from a legal perspective,

we are adopting an approach that we

believe is clearly legally acceptable.

Under this approach (as with the

proposed approach), the standards for

these vehicles are promulgated under

6750 Federal Register / Vol. 65, No. 28 / Thursday, February 10, 2000 / Rules and Regulations

72 Vehicles that are ‘‘designed’’ to accommodate

more than nine passengers in the rearward seating

area in their standard configuration but that have

some of the standard rear seating removed to

accommodate two or more wheel chair tie downs

would usually not be considered MDPVs.

73Currently, diesel heavy-duty engines are

certified to heavy-duty engine standards rather than

vehicle standards.

74ALVW is the average of curb weight and

GVWR. The test weight is sometimes refered to as

‘‘half payload’’.

section 202(a)(3), which applies to

heavy-duty vehicles/engines.

We are defining medium-duty

passenger vehicles as any complete

heavy duty vehicle less than10,000

pounds GVWR designed primarily for

the transportation of persons including

conversion vans (i.e., vans which are

intended to be converted to vans

primarily intended for the

transportation of persons. The

conversion from cargo to passenger use

usually includes the installation of rear

seating, windows, carpet, and other

amenities). We are not including any

vehicle that (1) has a capacity of more

than 12 persons total or, (2) that is

designed to accommodate more than 9

persons in seating rearward of the

driver’s seat or, (3) has a cargo box (e.g.,

a pick-up box or bed) of six feet or more

in interior length. We would consider

vehicles designed primarily for

passenger use to be those that have

seating available behind the driver’s

seat. We have added the rear passenger

seating capacity criterion to exclude

large passenger vehicles which are

primarily used in heavy-load passenger

applications. We do not believe vehicles

designed primarily for personal use

passenger transportation would be

equipped with rear seating for more

than 9 passengers. 72

We have added the pick-up bed

length criterion to the definition to

clearly distinguish standard pick-ups

from other vehicles meeting the GVWR

and seating capacity criteria. We

received several comments that

although the proposal clearly states our

intention not to include heavy-duty

pick-up trucks in the Tier 2 program,

the proposed regulatory definition was

unclear. Currently, heavy-duty pick-ups

have beds in excess of six feet. Any

future offerings of vehicles that are

equipped with significantly shorter beds

would be included in the MDPV

category, if the vehicle also met the

weight and seating capacity criteria.

EPA is making a distinction based on

bed length because a vehicle introduced

with a shorter bed would have reduced

cargo capacity and would likely have

increased seating capacity relative to

current pick-ups, making it more likely

to be used primarily as a passenger

vehicle.

Interim Standards

As noted above, the MDPVs and

HLDTs must meet the final Tier 2

standards by 2009 at the latest. Prior to

2009, HLDTs and MDPVs are required

to meet interim standards. The interim

standards, as described earlier in section

IV.B.4, are based on a corporate average

full life NOX standard of 0.20 g/mile

which is phased in 25/50/75/100

percent in 2004–2007. MDPVs must be

grouped with HLDTs for the interim

standards phase-in.

We received several comments from

manufacturers that requiring these

larger vehicles to meet a new, unique

standard prior to phase-in to the interim

program would worsen the workload

burden created by the Tier 2 program.

Manufacturers do not currently have

facilities available for chassis-testing

diesel vehicles and there is not enough

time to fold diesel vehicles into a

chassis-based program by 2004.73

To address this situation, we are

providing the following temporary

additional flexibilities for MDPVs. We

are finalizing an additional upper bin

for MDPVs for the interim program

(effective in model years 2004 through

2008). This bin would only be available

for MDPVs. The bin, shown in Table

IV.B–10, is equivalent to the California

LEV I standards that are applicable to

these vehicles prior to 2004. Vehicles

certified to this bin must be tested at

adjusted loaded vehicle weight (ALVW),

consistent with California program

testing requirements.74 Including this

upper bin provides manufacturers with

the ability to carry over their California

vehicles to the federal program prior to

their phase-in to the interim and final

Tier 2 standards. Once phased in to the

interim standards manufacturers may

continue to use the upper bin but the

vehicles must be included in the 0.20 g/

mi NOX average. The upper bin is not

available to manufacturers for the final

Tier 2 program.

TABLE IV.B.–10.—TEMPORARY INTERIM EXHAUST EMISSION STANDARDS BIN FOR MDPVS a

NOX NMOG CO HCHO PM

Full Useful Life (120,000 mile) ................................................................. 0.9 0.280 7.3 0.032 0.12

Notes:

aBin expires after model year 2008.

We proposed that HLDTs not needed

to meet the phase-in percentages for the

interim program during model years

2004—2006 would be required to meet

one of the interim bins. Such vehicles,

however, would not be included in the

calculation to demonstrate compliance

with the 0.20 g/mile average. Thus, we

proposed that the emissions of all

interim HLDTs would be capped at a

NOX value of 0.6 g/mile. We are

retaining the bin structure and

requirements which effectively cap NOX

emissions at 0.6 g/mile for all HLDTs

below 8,500 pounds GVWR, as

described in section IV.B. Similarly, for

MDPVs, the 0.9 g bin described above is

the highest bin available and acts as the

cap for vehicles not yet phased-in to the

interim standards.

In addition, for diesel MDPVs prior to

2008, we are allowing manufacturers the

option of meeting the heavy-duty engine

standards in place for the coinciding

model year. Diesels meeting the enginebased standards would be excluded

from the interim program averaging

pool. In 2008, the manufacturers must

chassis certify diesel vehicles and

include them either in the interim

program or in the final Tier 2 program.

In 2009 and later, all MDPVs, including

diesels, must be brought into the final

Tier 2 program. As with the higher bin

of chassis-based standards, the purpose

of this diesel provision is to provide the

option of carry-over of vehicles until

they are brought into the Tier 2

program. We believe these

modifications to the program will

substantially ease the workload

concerns of manufacturers in the

interim years by allowing them to carryover vehicle models and engine

families. The provisions also remain

consistent with EPA’s goal of including

the vehicles in the overall Tier 2

program structure.

Federal Register / Vol. 65, No. 28 / Thursday, February 10, 2000 / Rules and Regulations 6751

75As with HLDTs, the California OBDII

compliance option is available for MDPVs.

76For Tier 2 MDPVs, evaporative standards will

be 1.4 g/test for the 3 day diurnal+hot soak test and

1.75 g/test for the supplemental 2 day diurnal+hot

soak test.

77ORVR requirements are phased in for HLDTs,

at 40/80/100 percent in 2004–2006 (see 40 CFR

86.1810–01 (k)).

For diesel engines that are engine

certified and used in MDPVs, as allowed

through model year 2007, we are

requiring those engines to comprise a

separate averaging set under the

averaging, banking and trading

requirements applicable to heavy-duty

diesel engines. We are permitting

engine-based certification for these

diesel vehicles to provide time and

flexibility for manufacturers who may

have limited experience with chassis

certifying vehicles containing such

engines. However, we do not want to

create a situation where engines above

applicable engine standards could be

used in these vehicles, when other

MDPVs are being brought under

stringent standards. Therefore we

believe it is appropriate to constrain the

application of credits to these engines.

We note that we are not permitting

credits from other programs (like NLEV)

to be applied in any way to Tier 2 or

interim vehicles.

For LDT4s, we have finalized an

optional higher NMOG level of 0.280 g/

mile for bin 10 (0.6 g/mile NOX), as

described in section IV.B.4.a of the

preamble. MDPVs placed in bin 10 may

also certify to the higher NMOG level of

0.280 g/mile. This provision provides

manufacturers with the incentive of

selecting the lower NOX bin for MDPVs,

since the NMOG level is not an obstacle

to compliance.

As described in section IV. B.4.e.ii.,

manufacturers have two options for the

start of the program requirements. In

Option 1, the program begins with the

2004 model year for 25 percent all

vehicles. In Option 2, manufacturers can

exempt 2004 model year vehicle test

groups whose model years begin on or

after the fourth anniversary of this rule’s

signature. These options are also

available for MDPVs for the same

reasons we are providing them for

HLDTs. However, the additional 0.9 g

bin contained in Table IV.B.–10, the

optional higher NMOG standard of

0.280 g/mile for bin 10, and the option

of certifying to the engine-based

standards for diesels are available only

with Option 1.

Other Emission Control Requirements

We are requiring all non-diesel

MDPVs to be OBDII compliant

beginning in 2004. California requires

OBDII for their LEV I program and

therefore, the new OBDII requirements

are consistent with the approach of

allowing vehicles to be carried over

from California. 75 Diesel vehicles which

are carried over from the California

program are required to be equipped

with the OBD system as the system is

certified in California. Diesel vehicles

not carried over from California are not

required as part of this rulemaking to be

equipped with OBDII. However, we

have proposed OBDII requirements for

heavy-duty diesel engines in our heavyduty engines NPRM (64 FR 58472). If

OBDII requirements are finalized for

heavy-duty engines and vehicles as part

of that rulemaking the OBDII

requirements would likewise apply to

diesels in the MDPV category.

As proposed, we are applying Tier 2

evaporative emissions standards and

existing HLDT ORVR requirements to

MDPVs. MDPVs must be grouped with

HLDTs for purposes of phasing in to the

Tier 2 evaporative emission standards

contained in this rule. We have added

somewhat higher standards for the

MDPVs to account for their larger fuel

tanks and vehicle sizes.76 However, the

stringency of the standards remains

similar to that for HLDTs. These

standards are described in section

IV.B.4.f of the preamble. ORVR

requirements currently exist for HLDTs

and are to be phased-in through model

years 2004–2006.77 We proposed to

apply the same standards and phase-in

requirements to vehicles over 8,500

pounds GVWR. We are finalizing these

ORVR requirements for MDPVs, which

must be grouped with HLDTs for

purposes of phased-in to the ORVR

requirements.

For those manufacturers electing

option 2, OBD is required when the

vehicle family is covered under these

new requirements (i.e., 2004 or 2005

depending on when certification

occurs). For ORVR, the situation is

similar. The phase-in is 40 percent of

any 2004 certifications which occur four

years after this rule is promulgated, 80

percent in 2005, and 100 percent in

2006. As before, the vehicles covered by

these phase-ins must be combined with

those in the LDT3/4 phase-in for

purposes of calculating compliance.

We are finalizing Cold CO and

Certification Short Test requirements for

Tier 2 MDPVs. However, we are not

finalizing SFTP standards for MDPVs in

today’s rulemaking. Currently, SFTP

standards do not apply to any vehicles

above 8,500 pounds GVWR, including

those in the California LEV I and LEV

II programs. We are concerned,

therefore, that finalizing SFTP

requirements in today’s rulemaking

would prevent manufacturers from

carrying over vehicle models during the

phase-in years of the program. We are

currently contemplating a new SFTP

rulemaking which would consider ‘‘Tier

2’’ SFTP standards for all vehicles,

including MDPVs. California is also

interested in developing more stringent

SFTP standards within the context of

their LEV II program and we are

coordinating with California on these

new SFTP standards.

Sustained Severe Use; In-Use Testing of

MDPVs

While we are confident that MDPVs

can comply in-use with the standards

we are finalizing, manufacturers are

concerned about in-use liability for

MDPVs that are in sustained severe-use.

In our in-use emission testing program,

we generally screen vehicles for proper

maintenance and use and delete

vehicles that we believe may have been

misused or malmaintained. Also, in the

regulations for manufacturer in-use

testing, we permit manufacturers to

delete vehicles from samples if they

have been used for ‘‘severe duty (trailer

towing for passenger cars, snow

plowing, racing)’’, and we provide that

vehicles may be deleted for other

reasons upon EPA approval.

We recognize that MDPVs will be

marketed and used for carrying many

passengers, carrying heavy loads and

trailer towing. While it is not our

intention to exempt vehicles from in-use

liability that have been used for their

intended purposes, we understand that

some MDPVs may be subject to

sustained severe service applications,

such as frequent overloading or frequent

towing beyond manufacturer’s

advertised capacity and could not be

considered to be representative of

properly maintained and used vehicles.

Furthermore, we would not necessarily

consider to be representative MDPVs

which are routinely or regularly used in

heavy-load hauling application or

towing even within the manufacturers

limits. Thus, for example, an SUV

MDPV used on a daily basis to haul a

work crew and tow equipment to a

distant work site may not be

representative while the same SUV used

to haul the family and tow a boat to the

lake on weekend excursions would be

representative. MDPVs in sustained

severe operations should not be

included in manufacturer or EPA in-use

test programs, while those that see less

frequent severe operation should be

included.

6752 Federal Register / Vol. 65, No. 28 / Thursday, February 10, 2000 / Rules and Regulations

C. Our Program for Controlling Gasoline

Sulfur

As with our program for vehicles, the

program we are establishing today for

reducing sulfur levels in commercial

gasoline will achieve the same large

NOX reductions that we projected for

the proposed program. Here, too, the

final program is very similar to our

proposed program. Adjustments we

have made to the proposed program will

smooth the refining industry’s transition

to the low-sulfur requirements and

encourage earlier introduction of

cleaner fuel.

With today’s action, we are requiring

substantial reductions in gasoline sulfur

levels nationwide. As we explained in

Section IV.A, because sulfur

significantly inhibits the ability of

automotive catalysts to control

emissions, we had to consider sulfur’s

impact in setting the Tier 2 standards.

We knew at the time of proposal that

newer catalysts were more sensitive to

sulfur than older technologies, and

projected that Tier 2 catalysts would be

as or even more sensitive than those

used in today’s NLEV vehicles.

Furthermore, we believed that the sulfur

build-up on Tier 2 catalysts may be

irreversible. Since the proposal,

additional data we’ve collected have

confirmed and strengthened our

concerns. It now appears that the

catalysts expected to be used in Tier 2

vehicles will be even more sensitive to

sulfur than we originally estimated, and

that this sulfur impact will be

approximately 45 percent irreversible

under typical driving conditions. Thus,

the gasoline sulfur standards we finalize

today will enable the stringent tailpipe

emission standards we’re implementing

for Tier 2 vehicles and will help to

ensure that these low emission levels

will be realized throughout the life of

the vehicle. Furthermore, since vehicles

already on the road, including NLEV

vehicles, are in many cases quite

sensitive to sulfur, gasoline sulfur

control will also help to reduce

emissions of pollutants that endanger

public health and welfare from these

vehicles.

In developing this gasoline sulfur

control program, we gave substantial

consideration to the ability of the

refining industry to meet these

requirements. We proposed a set of

standards applying to refiners and to

individual refineries combined with a

sulfur averaging, banking, and trading

(ABT) program intended to provide

flexibility in meeting the standards. We

concluded that our proposal was

reasonable and cost-effective based on

our projections regarding the number of

refineries that would (1) need to reduce

sulfur levels each year as the standards

tightened, (2) need sulfur ABT credits to

meet the 30 ppm refinery average

standard in 2004 and/or 2005 to defer

installation of desulfurization

equipment, and (3) install

desulfurization equipment prior to

2004, generating the needed sulfur

credits. This analysis formed our picture

of the industry’s investment stream—a

year-by-year estimate of how many

refineries would be constructing new

equipment and what technologies these

refineries would choose. We assumed

that any investments would be in the

new, lower cost technologies, and that

these technologies would be available

and adequately demonstrated to allow

refiners to select them as early as the

year 2000 to begin operation (and thus,

credit generation) as early as 2002.

Based on these assumptions, our

analysis showed that sufficient credits

would be generated before 2004 to

enable a number of refineries to delay

construction and use credits to meet the

30 ppm standard in 2004, and in some

cases, even in 2005. Overall, we

believed our analysis represented a

reasonable and balanced rate of

investment by the industry over a

several year time period.

In response to our proposal, we

received many comments which raised

concerns about the feasibility of our

program. Some comments suggested

that our proposed declining cap (300

ppm cap for 2004 and a reduced cap of

180 ppm for 2005) could be an

additional and burdensome expense for

most refiners to meet. Specifically, these

commenters believed that the declining

cap would be more constraining than

compliance with the corporate average

or even the refinery average standards

(as long as the ABT program produced

sufficient credits). Because refiners

probably would not make multiple

investments in such a short time, the

180 ppm cap could force some refiners

to install the equipment needed to get

to the 80 ppm cap earlier than otherwise

needed. The commenters argued that

this would force all of the industry’s

investments into the first years of the

program rather than allowing for a

smoother transition over several years as

we had originally envisioned. Many

comments also suggested that since

there have not been long-term

commercial demonstrations of the

newer gasoline desulfurization

technologies, refiners would not

consider these technologies to be viable

and, if faced with our proposed 30 ppm

standard in 2004, may select the more

traditional, higher cost sulfur reduction

processes. Some of these commenters

suggested that we should delay the 30

ppm standard, and recommended a

range of suggested deadlines (2005–

2007).

We also received many comments

which suggested that the ABT program

restricted the generation of credits, and

provided no certainty that credits would

be generated prior to 2004. Commenters

stated that two features in particular—

the delay in establishing each refinery’s

sulfur baseline due to 1997–98 data

review and the strict 150 ppm ‘‘trigger’’

for generating credits—caused them to

question whether adequate sulfur

credits would be available. If credits

could not be guaranteed early enough to

forestall investment decisions, refiners

would be forced to begin construction

earlier than we had projected. Under

such a scenario, the costs of the program

would be substantially greater, and

many commenters suggested that,

regardless of cost, it would be

impossible for the entire industry to

meet the deadline (due to limitations on

engineering design and construction

resources as well as the time required to

obtain permits).

Finally, we received many comments

which argued that not all refineries

would be able to concurrently comply

with the proposed standards in the time

period provided, given the competition

for engineering resources and the time

needed for construction of

desulfurization equipment. These

comments focused specifically on small

refineries (owned by both small and

large corporations) and refineries that

were relatively isolated geographically

(such as many refineries in the Rocky

Mountain region) which had little

access to other sources of gasoline

should they have difficulty in

complying with our requirements. The

commenters generally argued that these

refiners needed more time than the rest

of the industry to meet our proposed

standards. Some of the commenters also

argued that the standards applicable to

many of these refiners should be less

stringent because of their belief that the

environmental needs of the states where

these refineries were located and/or

marketed gasoline were small relative to

the needs of other states. Suggestions for

temporary and permanent regional

programs which provided less stringent

control in the Western half of the

country were included with many of

these comments.

Based on what we’ve learned from the

comments received and additional

information we’ve gathered, we have

revised our analysis of when refiners

will invest in desulfurization equipment

and how the sulfur ABT program can

Federal Register / Vol. 65, No. 28 / Thursday, February 10, 2000 / Rules and Regulations 6753

best help to distribute these investments

over several years while maintaining the

original goals of the program. The

following is a brief summary of our new

analysis; a more complete explanation

of our assumptions can be found in the

RIA.

About 15 percent of current domestic

gasoline production already meets the

gasoline sulfur standard, or can do so

with very little additional capital

investment, and at most a small increase

in operating cost. The remainder of the

industry—the majority of U.S.

refineries—will have to install at least

one desulfurization processing unit to

lower gasoline sulfur to the required

levels. Furthermore, many of these

refineries will need to make changes to

their operations in advance of 2004

simply to comply with the 300 ppm cap

standard, even if they can obtain

sufficient ABT credits to delay

compliance with the 30 ppm refinery

average standard. Refiners facing this

situation will need to make their

decisions within a year or at most two

from today’s action. From the comments

we received and discussions we’ve had

with refiners and technology vendors,

we acknowledge that some of the newer,

more promising processes may not be in

operation for sufficient time to gain

valuable operating experience (one to

two years of operation) until 2002 or

later. Hence, we now believe that some

refiners may choose from one of the

traditional, commercially-demonstrated

desulfurization processes, even though

these technologies may be more costly,

to meet our standards.

However, we continue to believe that

the majority of refiners will delay

construction (taking advantage of the

sulfur ABT program and perhaps

making modest operational changes in

the interim) and will have a wide range

of technological options to choose from,

at reduced capital investment and

operating costs compared to the more

traditional approaches. Examples of

these technologies are CDHydro and

CDHDS (licensed by the company

CDTECH), Octgain 125 and Octgain 220

(licensed by Mobil Oil), S Zorb (licensed

by Phillips), IRVAD (licensed by Black

& Veatch), and others. These

technologies generally use conventional

refining processes combined in new

ways, with improved catalysts and other

design changes that minimize the

undesirable impacts (such as a

substantial loss in octane) and maximize

the effectiveness of the desulfurization

approach. Since these processes provide

less costly ways to reduce gasoline

sulfur, we have based our economic

assessment (summarized in Section

IV.D. below) on the presumption that

the majority of refiners will elect to use

one of these processes to meet the 30

ppm standard, even if it requires

delaying compliance (through the

purchase of ABT program credits) until

2006.

However, after considering the data

available to us about current refinery

sulfur levels and the ability of refiners

to reduce sulfur levels to meet the

standards, we have made several modest

changes to the program. These changes

will not affect the environmental

performance of the proposed program.

We agree that the declining cap had the

unintended consequence of forcing

investments earlier than desired for an

orderly transition to the 80 ppm cap.

Thus, we have changed the program

from the proposal, establishing a 300

ppm per-gallon cap in 2004 and 2005.

We do not expect this change to have an

impact on the environment (or on the

Tier 2 vehicles that will be introduced

in this interim period) since average

sulfur levels will be required to decrease

due to the declining corporate average,

which begins in 2004. We kept the

corporate average standards proposed

for 2004 and 2005, but are permitting

inter-company trading around these

standards. We believe this change will

provide further flexibility to the

industry in allowing some refineries to

delay construction and encourage others

to move forward sooner. Having now

concluded that many refiners would

benefit from an additional year to

evaluate and consider the technological

options before having to install

equipment to meet the 30 ppm standard,

we have delayed this standard for one

year. In acknowledgment that some

areas of the country have less urgent

environmental needs for the emissions

reductions that this program will bring,

and that many of the refiners that

supply gasoline to these areas are ones

which will have the most difficulty in

meeting the standards, we have

finalized a geographic phase-in of the

standards to complement the temporal

phase-in applicable to the rest of the

industry. Thus, in certain states in the

West, refiners have the option of

meeting interim standards while

delaying compliance with the 30 ppm

average until 2007. Finally, we have

made changes to the sulfur baseline

requirements and the credit trigger to

help ensure that the sulfur ABT program

functions as we originally envisioned it

would.

These changes will encourage

reductions in gasoline sulfur levels

beginning as early as 2000, while

providing enough flexibility to require

the majority of refineries to meet a 30

ppm average sulfur standard by 2006.

Overall, the industry will be able to

spread the needed investments over

several years rather than having to

comply as a whole by 2004, and will be

able to maximize the use of the most

efficient and lowest cost technologies.

While we have provided additional

flexibility for the industry, we have

done so without compromising the

environmental benefits of the program

in 2004 and beyond when compared to

our proposal.

The following sections summarize the

requirements for gasoline refiners and

importers, including our geographic

phase-in requirements; special

provisions for small refiners, and our

plans to facilitate the construction

permitting process to enable refiners to

install gasoline desulfurization

technology in a timely manner. Section

VI provides additional information

about the compliance and enforcement

provisions that will accompany these

requirements. More detailed

information in support of the

conclusions presented here is found in

the RIA and in our RTC document.

1. Gasoline Sulfur Standards for

Refiners and Importers

This section explains who must

comply with the gasoline sulfur control

requirements, the standards and

deadlines for compliance, and how

refiners can use the ABT program to

meet the standards. The last section

discusses how individual state gasoline

sulfur programs are affected by today’s

action. Standards specific to eligible

small refiners are presented in Section

IV.C.2.

a. Standards and Deadlines that

Refiners/Importers Must Meet

Anyone who produces gasoline for

sale in the U.S. must comply with these

regulations. This includes anyone

meeting our definition of a refiner

(including blenders, in most instances)

and importers. Certain refiners may

qualify for temporarily less stringent

standards and deadlines because these

companies either (1) market gasoline in

the temporary geographic phase-in area

(explained in section b below), or (2)

they qualify under our definition of

small refiner (explained in section

IV.C.2 below). Foreign refiners may also

have separate requirements, if they

qualify as small refiners.

These requirements will apply to all

gasoline sold in the U.S., including

Alaska, Hawaii, Puerto Rico, American

Samoa, the Virgin Islands, Guam, and

6754 Federal Register / Vol. 65, No. 28 / Thursday, February 10, 2000 / Rules and Regulations

78 Gasoline sold in California is exempt from

meeting these Federal standards, due to our belief

that California gasoline already meets or exceeds

these requirements. See Section VI for more

discussion on this issue.

79 Including gasoline produced for use in the

geographic phase-in area and small refiner gasoline.

the Northern Mariana Islands. 78 This

national approach is appropriate, based

on our conclusions that vehicle

emissions must be reduced nationwide

to adequately protect public health and

the environment and Tier 2 vehicles

require protection from the harmful

impacts of gasoline sulfur regardless of

where they are operated.

Table IV.C.–1. summarizes the

standards for gasoline refiners and

importers. There are three standards

which refiners and importers must

meet. In 2004 and beyond, every gallon

of gasoline produced is limited by a pergallon maximum or ‘‘cap.’’ The cap

standard becomes effective January 1,

2004 (and January 1 of subsequent years

as the cap standard changes). Also, in

2004 and 2005, each refiner must meet

an annual-average standard for its entire

corporate gasoline pool. Finally, each

individual refinery is subject to a

refinery average standard, beginning in

2005. Refineries that do not take

advantage of the sulfur ABT program

will have actual sulfur levels averaging

30 ppm beginning in 2005. Additional

details about the requirements for

meeting these standards is found in the

following sections.

TABLE IV.C.–1.—GASOLINE SULFUR STANDARDS FOR REFINERS, IMPORTERS, AND INDIVIDUAL REFINERIES

[Excluding Small Refiners and GPA Gasoline]

Compliance as of— 2004 a 2005 2006+

Refinery Average, ppm b .......................................................................................................................... .................... 30 30

Corporate Pool Average, ppm c ............................................................................................................... 120 90 ....................

Per-Gallon Cap,d ppm ............................................................................................................................. 300 300 80

NOTES:

aWe project that the pool averages will actually be below 120 ppm in 2004. For a discussion of how the program gets early sulfur reductions

before 2004, see section IV.C.1.c. bThe refinery average standard can be met through the use of sulfur credits or allotments from the sulfur ABT program, as long as the applicable corporate pool average and per-gallon caps are not exceeded, as explained in Section IV.C.1.c.viii. c.The corporate pool average standard can be met through the use of corporate allotments obtained from other refiners, if necessary, as explained in Section IV.C.1.c.iii. d In 2004, exceedances up to 50 ppm beyond the 300 ppm cap are allowed. However, in 2005, the cap for all batches will be reduced by the

magnitude of the exceedance.

i. What Are the Per-Gallon Caps on

Gasoline Sulfur Levels in 2004 and

Beyond?

To reduce the potential for permanent

damage to the emission controls of Tier

2 vehicles and later NLEV vehicles, we

are implementing caps on the sulfur

content of every batch of gasoline

produced or imported into the country

beginning in 2004. As shown in Table

IV.C.–1, a cap of 300 ppm is first

implemented in 2004. This cap remains

in 2005. In 2006 and beyond, the cap is

lowered to 80 ppm. These caps apply at

the refinery gate. Sulfur caps are also

applied to gasoline downstream of the

refinery; see Section VI for additional

discussion of downstream cap

standards. These downstream caps will

facilitate compliance and enforcement

without changing the way the

distribution system currently functions.

Several commenters suggested the

rule should also include a provision to

address the occasions when refiners

must temporarily take processing units

out of operation so that planned,

recurring maintenance can be

performed, commonly termed

‘‘turnarounds,’’ or if processing units are

unexpectedly taken out of operation due

to accident or malfunction, commonly

termed ‘‘upsets.’’ These commenters

expressed particular concern that the

gasoline produced at a refinery may not

meet the sulfur cap standards when a

refinery’s desulfurization unit is not

operating. These commenters contended

that the regulations should allow

refiners to produce gasoline that

exceeds the cap standard for a limited

time where the excess sulfur is due to

a turnaround or upset. However, they

also suggested that the refiner should be

required to meet the refinery average

standard with the high sulfur gasoline

included in its average calculation in

order to create an incentive for refiners

to limit the volume and sulfur content

of high sulfur gasoline.

Today’s rule does not grant relief to

refiners because of turnarounds or

upsets. While the concern raised by the

commenters is reasonable, the solution

they suggested would nevertheless

result in distribution of gasoline

exceeding the cap standards. The cap

standards are necessary because

gasoline with higher sulfur levels will

significantly harm or destroy the

emission controls used in Tier 2

vehicles.

We believe there are strategies refiners

can use to mitigate or eliminate the

difficulties associated with turnarounds

and upsets. For example, some refiners

schedule turnarounds for a number of

refinery processing units at the same

time when the refinery largely stops

producing gasoline, thereby avoiding

the need to produce any high sulfur

gasoline. In other situations it may be

possible for a refiner to store high sulfur

products until the desulfurization unit

is operating or to transfer high sulfur

products to a neighboring refinery for

desulfurization.

We commit to continue evaluating the

turnaround issue especially as new

technologies are introduced. Based on

our evaluation, if a problem is evident

and if an appropriate solution can be

devised, we will act at that time.

In 2004, if any batch of gasoline 79

exceeds the 300 ppm cap (up to 350

ppm), then the cap for all batches

produced by the refinery in 2005 will be

reduced by the magnitude of the

exceedance. For example, if any given

batch of gasoline has a cap of 325 ppm

(a 25 ppm exceedance) in 2004, then the

cap becomes 275 ppm for all batches of

gasoline produced by that refinery in

2005. However, at no time in 2004 can

a batch be higher than 350 ppm sulfur.

We have made this adjustment to

accommodate those refiners who would

have to invest in control technologies to

meet the 300 ppm cap in 2004 (perhaps

at a higher cost than they would incur

if they could delay the investment a

year) but could otherwise meet a

slightly higher cap through operational

changes which would not require new

equipment.

Federal Register / Vol. 65, No. 28 / Thursday, February 10, 2000 / Rules and Regulations 6755

ii. What Standards Must Refiners/

Importers Meet on a Corporate Average

Basis?

Refiners and importers must meet

annual-average, volume-weighted sulfur

standards for their entire corporate

gasoline pool in 2004 and 2005. In 2004,

this standard is 120 ppm; in 2005, it is

reduced to 90 ppm. In 2006 and beyond,

there will no longer be a corporate pool

average standard, since each refinery

and importer will be held to its own

single refinery average standard, as

discussed in the next section.

These standards represent the

maximum allowable sulfur levels, on an

annual average basis, for each refiner/

importer, volume-weighted across all

refineries owned and operated by that

refiner (or all gasoline imported by the

importer in the calendar year), rather

than at each individual refinery or by

each batch of gasoline. Thus, a refiner’s

gasoline may exceed the average

standard of 120 ppm at one refinery, if

sufficient gasoline below that standard

is produced at its other refinery(ies),

such that its corporate, volumeweighted average sulfur level does not

exceed 120 ppm. Alternatively,

allotments may be used to meet this

requirement. This requirement does not

apply to small entities or to corporations

that do not have to meet the pool

average standard in the GPA program.

For compliance with this corporate

averaging requirement, as well as with

the other requirements of this subpart,

we consider a parent corporation

owning wholly-owned subsidiaries that

also own refineries to be the refiner of

these facilities. Thus, the parent

corporation must comply with refiner

corporate average requirements. In its

compliance calculations, the refiner

must include the gasoline produced at

the refineries it owns, plus the gasoline

produced at the refineries owned by its

wholly-owned subsidiaries.

For purposes of compliance, we

proposed that a joint venture, in which

two or more refiners collectively own

and operate one or more refineries, be

treated as a separate refining

corporation under the gasoline sulfur

requirements. Hence, a refinery owned

by a joint venture would have been

included in the corporate pool

calculations of the joint venture, and

could not have been included in

calculations with other refineries solely

owned by one of the parties to the joint

venture. Based on comments we

received on this issue which argued that

a company with majority ownership in

the joint venture should be allowed to

count the jointly held refinery in its

corporate average, we have revised our

treatment of refineries owned by joint

ventures. Each joint venture must

separately meet the corporate pool

average standard, whether the joint

venture owns one or multiple refineries.

If a joint venture fails to meet the

corporate pool average standard, then

each partner in the joint venture is

jointly and severally liable for the

violation. However, if one partner to a

joint venture refinery includes the joint

venture refinery in its corporate pool,

and that corporate pool meets the

corporate pool average standard, then

the joint venture will be considered by

EPA to be in compliance (if the joint

venture owns only the one refinery). If

the joint venture owns multiple

refineries and only one or some of the

refineries is included in the corporate

pool calculations of one partner,

compliance by the joint venture with

the corporate pool average standard will

be judged based on the average sulfur

levels of the remaining refinery(ies)

owned by the joint venture.

In meeting the corporate average stds

in 2004 and 2005, refiners and

importers may use allotments as

discussed in IV.C.1.c below.

iii. What Standards Must be Met by

Individual Refineries/Importers?

Beginning in 2005, every refinery

must meet an average standard of 30

ppm sulfur at the refinery gate on an

annual, volume-weighted basis.

Similarly, every importer must meet the

30 ppm average standard beginning in

2005. (These requirements do not apply

to small entities or to GPA gasoline). In

meeting this standard, individual

refineries and importers may use credits

generated or purchased under the

provisions of the sulfur ABT program

discussed below in Section IV.C.1.c,

and/or, in 2005 (only), sulfur allotments

(as described in the previous section)

obtained from a refiner who has excess

allotments to sell, if they are unable to

comply based on their actual gasoline

sulfur levels. Hence, the actual average

sulfur levels for gasoline produced at

some refineries can be higher than 30

ppm in 2005, but only if refiners use (1)

credits generated from cleaner gasoline

produced early and/or (2) allotments

generated by a refiner which produces

gasoline averaging, on a corporate basis,

lower than 90 ppm in 2005. However,

the corporate pool average standards

and per-gallon caps will limit the degree

to which gasoline can exceed 30 ppm on

average.

We allow refiners to use either sulfur

allotments or ABT credits to meet the 30

ppm standard in 2005 for several

reasons. First, this is an

environmentally neutral approach

because the national pool in 2005 will

still average no greater than 90 ppm,

since every refiner must meet the

corporate average standard before

applying allotments to the compliance

of any refineries with the 30 ppm

standard. Second, it provides refiners

who have excess allotments in 2005 an

additional market for those allotments,

thus giving refiners an incentive to

exceed the 90 ppm corporate average

standard in 2005. In either case, the

reductions will have occurred and thus

the allotments and credits have very

similar purposes and thus should be

interchangeable.

In 2006 and beyond, the 30 ppm

refinery average standard continues to

be a requirement for every refinery or

importer. The sulfur credits generated in

the ABT program may be used by

refineries or importers to comply with

this requirement. However, because of

the 80 ppm cap in these years, we

expect that the majority of refiners/

importers will average 30 ppm, although

some individual refineries/importers

could average slightly more or less (if

the refineries/importers bank, sell, or

purchase credits to meet this standard,

as explained in the ABT discussion

below). Furthermore, the majority of

credits will expire at the end of 2006.

b. Standards and Deadlines for Refiners/

Importers Which Provide Gasoline to

the Geographic Phase-In Area (GPA)

As indicated above, certain refiners

may qualify for temporarily less

stringent standards and deadlines for

some or all of their gasoline because

these companies either (1) produce

gasoline to be sold in the temporary

geographic phase-in area (GPA) or (2)

qualify under our definition of small

refiner. In this section, we explain the

geographic phase-in area of our program

and the interim standards and deadlines

for compliance in that area. The

provisions that apply to qualifying small

refiners are described in section IV.C.2.,

below.

i. Justification for Our Geographic

Phase-In Approach

In addition to phasing in our national

gasoline sulfur program temporally from

2004–2006, we are phasing in our

program geographically. In response to

our proposal, we received many

comments from the refining industry

regarding timely implementation of our

proposed gasoline sulfur program.

Commenters argued that not all

refineries would be able to concurrently

comply with the proposed standards in

the time period provided, given the

competition for engineering resources

and the time needed for construction of

6756 Federal Register / Vol. 65, No. 28 / Thursday, February 10, 2000 / Rules and Regulations

80Much of this gasoline is produced by small

volume refineries that are not owned by small

businesses, and are therefore not afforded the

flexibility of the small refiner provisions described

in Section IV.C.2.

81Alaska, Colorado, Idaho, Montana, New

Mexico, North Dakota, Utah, and Wyoming

desulfurization equipment. In

consideration of these comments, we

have made some modifications to

enhance the timing of our program

without compromising the

environmental benefits we expected

from our proposal.

As part of our assessment we also

examined other phase-in approaches

which might enhance the orderly

introduction of refining technology

without jeopardizing the environmental

benefits of our program. As a result of

this assessment, we have concluded that

many states in the Great Plains and

Rocky Mountain areas of the United

States have a somewhat less urgent

environmental need for ozone precursor

reductions in the near term. Moreover,

their gasoline supply is dominated by

that produced by small capacity,

geographically-isolated refineries

located therein. As a general rule,

refineries in this area will have the most

difficult time of all refineries

nationwide in competing for the vendor,

supply, engineering, and construction

resources needed to modify their

refineries to comply with the standards.

Based on 1998 Department of Energy

data, over 80 percent of the gasoline

sold in this area is produced by the

relatively small refineries located within

the region.80 Similarly, Alaska faces a

less urgent environmental need for

reductions in ozone precursors and has

refineries which are challenged and

geographically isolated.

A more orderly and cost-efficient

phase-in of the 30 ppm standard could

be achieved if all gasoline sold in this

area was subject to somewhat less

stringent standards than those in the

rest of the country for a short time. This

approach will allow the refineries

producing gasoline for use in this area

more compliance flexibility, more time

to install and prove out the equipment

needed for compliance, and thus a

greater opportunity to reduce their

overall costs. As described below, this

approach results in only a minimal loss

in emission reduction benefits. By

stretching out demand for design,

engineering, construction and other

related services during the 2000–06

period, these provisions should also

help to reduce the overall costs of the

gasoline sulfur program.

The remainder of this section is

divided into two parts. The first

describes the rationale for development

of this approach and how we identified

the appropriate area, and the second

provides a description of the

requirements for refiners and importers

that produce fuel for sale in the area.

ii. What Is the Geographic Phase-in Area

(GPA) and How Was it Established?

As we considered the geographic

phase-in approach, we aimed to

minimize the environmental losses

which could occur from exposing Tier

2, NLEV, (and other) vehicles to higher

gasoline sulfur levels when the gasoline

sulfur standards are being phased in

nationwide. We used two criteria to

develop and evaluate this approach: (1)

relative environmental need and (2) the

ability of U.S. refiners and the

distribution system to provide

compliant gasoline.

The states we have identified for the

GPA are shown in Figure IV.C–1.81

BILLING CODE 6560–50–P

BILLING CODE 6560–50–C

The first and primary criterion we

considered in defining this area was

environmental need. In defining the

GPA, we identified those states that

have somewhat less urgent

environmental need in the near term for

reductions in ozone precursors and

whose emissions are less important in

terms of ozone transport concerns. This

area includes some states that are

located in the Great Plains and the

Rocky Mountains, as well as Alaska.

Most states within the Rocky Mountains

and Great Plains do not have a

compliance problem with the 1-hour

ozone standard in the near term,

although they do have concerns in terms

of maintaining compliance with the

particulate matter standard. However,

there are two states (Arizona and

Nevada) in the Rocky Mountain vicinity

that do have ozone air quality concerns.

These states have instituted local fuel

quality programs (in Phoenix, AZ and

Las Vegas, NV) to reduce ozone

precursor emissions. In addition, as

shown in Table III.C–2, Arizona and

Nevada are projected to have concerns

with PM10 compliance in the future.

Given these factors, we excluded them

Federal Register / Vol. 65, No. 28 / Thursday, February 10, 2000 / Rules and Regulations 6757

82As discussed below, refiners can supply

gasoline not designated as GPA gasoline to the GPA,

provided it meets the standards in Table IV.C.–2.

Also, the GPA standards do not apply to gasoline

produced by small refiners that is used in the GPA.

from the phase-in area and its

temporarily less stringent standards

except as described below in Section

IV.C.1.b.vii for counties and tribal lands

in adjacent states.

We also defined the phase-in area

based on the relative difficulty of

producing or obtaining complying

gasoline. The refining industry in the

GPA is dominated by relatively low

capacity, geographically-isolated

refineries many of which are owned by

independent companies. Such refineries

face special challenges in complying

with the requirements of the national

program by 2004 because their crude

capacity, corporate size, and location

make it difficult for them to compete for

the design, engineering, and

construction resources needed to

comply by 2004.

Furthermore, an assessment of 1998

gasoline production and use data and

information on the products pipeline

system shows that states in the GPA and

portions of several adjoining states are

solely or predominantly dependent on

gasoline produced by these refineries

and have limited or no access to

gasoline from other parts of the country.

Based on this analysis, we concluded

that several states and portions of other

states meeting our first criterion (less

urgent environmental need for ozone

precursor emission reductions) also face

the likelihood of a supply shortage of

low sulfur gasoline. Providing low

sulfur gasoline to these states and

adjoining areas is expected to be more

difficult and costly in the near term.

Section IV.C.1.b.vii below, discusses

how the adjoining areas (counties/tribal

lands) will be identified.

Thus, we believe it is appropriate to

phase in the 30 ppm average, 80 ppm

cap standards in these areas by allowing

an additional year compared to the rest

of the country, rather than delaying

implementation of the standards

nationwide to accommodate these

states. Under this approach, the areas

with the most urgent need for the ozone

reduction benefits associated with low

sulfur gasoline will realize them as soon

as is feasible, and other areas will

experience them shortly thereafter.

On the other hand, much of the area

in the adjoining states has significant

pipeline, rail, barge, and truck access to

gasoline which will be capable of

meeting the standards in Table IV.C–1

beginning in 2004. Even if these states

have less environmental need in the

near term, there are health benefits

(particulate and air toxic emission

reductions) as well as performance

benefits for vehicle emission control

systems (including avoidable

irreversible sulfur effects) which need

not be foregone. Therefore, we

concluded that since it will not be more

difficult to send gasoline to these

adjoining areas through the distribution

system, the significant environmental

benefits of requiring low sulfur gasoline

as early as is feasible justifies excluding

these states from the GPA.

Some might argue that there are other

states which should be considered

under this program. However, based on

our criteria of environmental need

(including ozone transport and

irreversibility concerns) challenged

refineries, and limited access to

complying gasoline we could identify

no other states or territories which to

include.

iii. Standards/Deadlines for Gasoline

Sold in the Geographic Phase-in Area

While the states in the GPA may have

less of an environmental need for ozone

precursor reductions in the near term,

there are significant environmental

reasons to make the program as

stringent as possible, still enabling a

smooth transition to low sulfur gasoline

nationwide. Toward that end, we are

establishing the following requirements

for gasoline sold in the GPA, which we

view as the appropriate balance between

these two factors.

The GPA provision covers all gasoline

produced or imported for use in the

GPA, whether refined there or brought

in by pipeline, truck, rail, etc.82 Foreign

refiners are involved in this program

through the importers, who are, in fact,

the regulated entities. Refineries and

importers must meet a 150 ppm average

and a 300 ppm cap for all gasoline

produced or imported for the GPA

under this program beginning January 1,

2004. However, if a refinery’s/importer’s

1997–98 average sulfur level is less than

150 ppm, then that refinery’s/importers

gasoline has a standard of its baseline

plus 30 ppm but in no case greater than

150 ppm. For example, a refinery with

a baseline of 100 ppm would have a

sulfur standard of 130 ppm for its GPA

gasoline, a refinery with a baseline

sulfur level of 140 ppm would have a

standard of 150 ppm for its GPA

gasoline, and a refinery with a baseline

of 200 ppm would have a standard of

150 ppm for its GPA gasoline.

Furthermore, if under the ABT

provisions discussed below and in

section IV.C.1.c, a refinery/importer

generates credits (in 2000–2003) and/or

allotments (in 2003) by dropping its

refinery/imported gasoline average

below 150 ppm then the baseline for

that refinery is set at the new level and

the standard becomes baseline plus 30

ppm but not greater than 150 ppm. This

is to ensure that refineries and importers

who already are lower than the 150 ppm

standard on average maintain current

sulfur levels. The 30 ppm factor is

intended to allow some flexibility for

refineries and importers whose 1997

and 1998 levels are an aberration from

normal operations or who face changes

in crude slates in future years.

Corporate pool average standards

apply in the national gasoline sulfur

program for calendar years 2004 and

2005. Most refiners/importers producing

gasoline for use in the GPA market the

majority of their gasoline outside of the

GPA where they compete with many

other refineries. Since the phase-in of

the national program expects

compliance with the 120/90 ppm

corporate pool average standards in

2004 and 2005, we are requiring that

refiners/importers who market the

majority (greater than 50 percent of

production volume) of their gasoline

outside of the GPA to account for the

sulfur levels of their GPA gasoline in

their calculation for compliance with

the corporate pool average standards.

To provide additional flexibility

during this phase-in, refiners may use

sulfur ABT credits and allotments (as

explained in IV.C.1.c) to meet these

standards. Refineries producing GPA

gasoline can generate credits beginning

in 2000 under the provisions of the

national program (described in section

IV.C.1.c). Also, refineries/importers

marketing gasoline in the GPA may

through extraordinary measures be able

to generate credits in 2004–2006. To

qualify they must achieve levels below

150 ppm or their more stringent

baseline levels as discussed above

whichever is less. Under these

circumstances, these refineries/

importers can earn credits for the GPA

gasoline they produce during 2004–06.

Credits generated under the GPA

program are fully fungible with national

credits and are subject to the same

regulatory requirements.

The national program includes

provisions which permit refiners/

importers to generate allotments for use

in 2004 and 2005. Refiners and

importers marketing gasoline in the

GPA may only generate sulfur

allotments in 2004 or 2005 if their

corporate average sulfur level meets the

corporate pool average standards for

each year (as indicated in Table IV.C.1),

including gasoline produced for the

GPA, if applicable. Refiners not

compelled to meet the corporate pool

6758 Federal Register / Vol. 65, No. 28 / Thursday, February 10, 2000 / Rules and Regulations

83These segregation and designation

requirements do not apply to gasoline produced by

refiners subject to the small refiner standards

described in Section IV.C.2. This is because small

refiner gasoline can be sold anywhere in the

country, and is not subject to different standards

depending on where it is sold.

average standards under the GPA may

not generate allotments.

The temporary provisions for the GPA

apply for three years, 2004 through

2006. Since the low sulfur standards for

the rest of the country require

compliance with a 30 ppm refinery

average standard and an 80 ppm gallon

cap in 2006, the geographic phase-in

provides an additional year to reach

those standards. This extra year and the

somewhat less stringent standards

during the phase-in will provide the

refining industry the opportunity for

more orderly transition to the 30/80

ppm standards by 2007.

Requirements for gasoline sold in the

GPA are summarized in Table IV.C.–2,

below. Gasoline produced by refiners

subject to the small refiner standards

described in Section IV.C.2. of this

notice is not subject to the provision of

the geographic phase-in, since the small

refiner provisions apply to eligible

refiners regardless of geographic

location. Gasoline produced by such

refiners can be sold nationwide,

including in the GPA.

TABLE IV.C.–2.—GASOLINE SULFUR STANDARDS FOR THE GEOGRAPHIC PHASE-IN AREA

[Excludes Small Refiners]

Compliance as of— 2004 2005 2006

Refinery GPA Gasoline Average a, ppm ................................................................................. 150 150 150.

Corporate Pool Average b, ppm ............................................................................................... 120 90 Not Applicable.

Per-Gallon Cap c, ppm ............................................................................................................ 300 300 300.

Notes:

aThe refinery average standard for GPA gasoline is the more stringent of: 150 ppm; the refinery 1997–1998 baseline plus 30 ppm; or the sulfur level from which early credits were generated plus 30 ppm. Refiners can use credits or allotments to meet the average. bApplies only to refiners/importers which sell >50% of their gasoline outside the GPA.

cAs discussed above, in 2004 both GPA and Non-GPA gasoline may have a sulfur content as high as 350 in which case the refinery or importer becomes subject to a correspondingly more stringent cap standard in 2005.

iv. What Are the Per-Gallon Caps on

Gasoline Sulfur Levels in the Phase-in

Area?

The sulfur level caps for gasoline sold

in the phase-in area and the rest of the

nation are the same in 2004 and 2005,

but in 2006 the cap remains at 300 ppm

in this area while it declines to 80 ppm

for the rest of the country. To assure that

compliance at the refinery gate is correct

regardless of where the gasoline is

ultimately sold, as gasoline intended for

the GPA moves in the distribution

system to or through the geographic area

it must be identified as phase-in area

gasoline in product transfer documents

and must remain segregated from

gasoline intended for use outside this

area. In addition, use of phase-in area

gasoline is prohibited outside the GPA,

but the converse is allowed, i.e.,

gasoline designated for use outside the

GPA can be used in this area. For all

three years, refiners and importers must

meet the requirements described in

Tables IV–C.1 and IV–C.2, as applicable,

and therefore must maintain refinery or

import records as applicable as to where

a gasoline batch is sold. 83

We recognize that this higher

standard/cap for one year could create

the incentive for those not marketing

gasoline in the GPA today to seek a

market to sell higher sulfur gasoline and

for others to seek to increase market

share. While this is indeed allowable

under our program and is perhaps to be

anticipated in a free market system, in

all likelihood the incentives are small.

Such refiners/importers would still have

to meet the 150 ppm average and would

perhaps face increased shipping and

marketing costs. Nonetheless, we plan

to monitor market developments to

assess whether such a provision creates

significant market shifts or the potential

for increases in average sulfur levels in

the GPA gasoline.

v. How Do Refiners/Importers Account

for GPA Fuel in Their Corporate

Average Calculations?

Those refiners or importers that sell

all of their gasoline to the GPA (i.e., they

produce no fuel for use outside the

GPA), regardless of whether they are

located within or outside of the area,

have refinery/importer standards that

are equal to the least of 1) 150 ppm, 2)

the refinery’s or importer’s 1997–98

average sulfur level plus 30 ppm or 3)

the refinery’s or importer’s lowest actual

annual sulfur level plus 30 ppm in any

year 2000–2003 if credits are generated.

Because the refiners produce all of their

fuel for use in the GPA, they are exempt

from the corporate average standards in

Table IV.C–1.

Furthermore, any refiner/importer

which certifies 50 percent or more of its

gasoline production volume for sale as

GPA gasoline in 2004 and 2005 is not

required to meet the corporate pool

average for that year for its entire

gasoline pool. Not only would it be

difficult to comply on average (if it were

assumed that the GPA gasoline was 150

ppm and non-GPA gasoline was 30

ppm), but also it would undermine the

achievement of the basic goal of a more

orderly and efficient phase-in of low

sulfur gasoline since the flexibility

afforded by the GPA could be

diminished.

Otherwise, those who produce less

than 50 percent of their gasoline for the

GPA (which is the majority of those

refiners which market in both

locations), must meet the corporate pool

average standards in 2004 and 2005 for

their entire gasoline pool. Thus, such

refiners must compensate for the higher

sulfur levels of their GPA gasoline by

producing non-GPA gasoline that

averages sufficiently less than 120 ppm

in 2004 and 90 ppm in 2005 to ensure

that their corporate average meets the

corporate pool average standard for each

year. Importers who provide less than

50 percent of their gasoline to the GPA

must also include their GPA gasoline in

their overall corporate pool average

calculation. Alternatively, the refiner

can use sulfur allotments to meet the

corporate pool average standard for its

total gasoline production, including

gasoline sold inside and outside the

phase-in area. Since most refiners which

sell gasoline both in and outside the

GPA sell the vast majority outside the

GPA the additional flexibility provided

for gasoline sold in the phase-in area

should not significantly affect

compliance with the corporate pool

average standard for a refiner’s

nationwide production.

vi. How Do Refiners/Importers Apply for

the Geographic Phase-in Area

Standards?

As part of program administration, we

are requiring that any refiner/importer

Federal Register / Vol. 65, No. 28 / Thursday, February 10, 2000 / Rules and Regulations 6759

84 If a refinery has a baseline sulfur level higher

than 120 ppm (as described below in IV.C.1.c.v.),

then credits are generated from the baseline to 120

ppm and allotments from 120 ppm to the new

sulfur level (and discounted 20 percent if

applicable).

expecting to sell gasoline in this area

during the phase-in period (2004–2006)

make application to EPA in writing by

December 31, 2000. This application

would provide the minimum

information needed by EPA to

characterize a refiner’s/importer’s

participation, establish the applicable

standards if the 1997–98 average is less

than 150 ppm, and establish our

enforcement program for refiners/

importers in this area for gasoline

entering or leaving the area.

Participation on the part of any refinery

or importer is voluntary. At any time, a

refiner/importer who previously opted

into the GPA program may produce

gasoline meeting the standards in Table

IV.C–1 in the GPA, or may cease

producing gasoline for the GPA (and

produce gasoline meeting the standards

in Table IV.C–1 solely outside of the

GPA). Such a decision would affect the

averages/caps which apply to the

gasoline sold in the GPA. Gasoline sold

in the GPA that is not designated as

GPA gasoline is considered Non-GPA

gasoline for purposes of compliance

with the corporate pool average

requirement and refinery average

requirements.

vii. How Will EPA Establish the GPA in

Adjacent States?

EPA is establishing a geographic

phase-in area that encompasses eight

states (MT, ND, ID WY, CO, UT, NM,

AK). In addition, counties and tribal

lands in states immediately adjacent to

these which received a majority of their

gasoline in calendar year 1999 from a

refinery(ies) located within the GPA

will be covered by the phase-in area

provisions. The criteria to identify these

additional counties and tribal areas are

designed to identify areas whose

gasoline distribution system is closely

tied to the eight states such that they

share the same characteristics of

gasoline supply. Therefore, dispensing

outlets (retail and private) in such areas

will continue to have access to that

gasoline in most cases. Distribution and

production of gasoline in these

additional areas will be subject to the

same standards and requirements as

gasoline in the eight states identified

above.

At this time, EPA is not able to

identify all the counties and tribal lands

that would be included in the phase in

area. In light of the air quality benefits

of introducing low sulfur gasoline as

quickly as possible, we want to ensure

that the phase-in area is accurately

identified and that including any areas

outside these eight states will not have

a significant adverse air quality impact

on any counties or tribal lands that are

included in the phase-in area. EPA will

be working with interested stakeholders

will to conduct an assessment to

determine which counties/tribal lands

within the immediately adjacent states

meet the criteria as described in the

regulatory text. EPA expects to complete

action on this assessment by December

31, 2000. c. How Does the Sulfur

Averaging, Banking, and Trading

Program Work?

The sulfur ABT program provides

flexibility to refiners by giving them

more time to bring all of their refineries

into compliance with the corporate

averages in 2004 and 2005 as well as the

30 ppm individual refinery standard in

2005 and beyond. ABT will provide the

opportunity for reduced costs by

allowing the industry the flexibility to

average sulfur levels among different

refineries, between companies, and

across time. With ABT, some refineries

will be able to delay installation of

desulfurization equipment, because

other refineries will generate sulfur

allotments and credits through early

sulfur reductions. In this way,

installation of desulfurization

technology will be spread out over a

longer period of time than would be the

case without ABT. Since, with the

banking provisions, reductions in

annual average sulfur levels which

occur as early as 2000 have a value

during program implementation, the

ABT program provides an incentive for

technological innovation and the early

implementation of refining technology.

The ABT program also provides the

opportunity for meaningful emissions

reductions in 2004 because it allows the

Tier 2 standards to be implemented

earlier than might otherwise have been

possible (if the Tier 2 standards were

delayed to provide the refining industry

more time to comply), and because it

provides direct environmental benefits

even in the years before Tier 2 vehicles

are introduced. One benefit is related to

the effect of gasoline sulfur on exhaust

emissions, as discussed in the

Regulatory Impact Analysis. This

benefit will result both from older

vehicles on the road (Tier 0 and Tier 1

emission control technologies, which

have some degree of sulfur sensitivity

and will benefit from sulfur reductions

which occur prior to implementation of

the refiner and refinery standards

summarized in Table IV.C–1) and from

NLEV vehicles (which are more

sensitive to sulfur than earlier

technologies) which will continue to be

sold while Tier 2 vehicles are phasedin. Another environmental benefit is the

reduction in atmospheric sulfur loads as

a direct result of reduced gasoline sulfur

levels, leading to reduced emissions of

sulfur-containing compounds from

motor vehicles.

The following sections explain the

requirements for participation in the

sulfur ABT program for allotments and

credits.

Sulfur Allotment Program

i. Generating Allotments Prior to 2004

To provide additional incentive for

early sulfur reductions and to enhance

the overall feasibility and cost

effectiveness of the gasoline sulfur

control program, we are implementing a

sulfur allotment program. While few

commenters supported the sulfur

allotment concept in the NPRM, a

number suggested that greater flexibility

for compliance in the early years would

be helpful. The program described

below is in addition to the early sulfur

credit program described elsewhere.

For 2003, refineries can generate

sulfur allotments (in ppm-gallons) by

producing gasoline containing less than

60 ppm sulfur on an annual-average

basis. This 60 ppm ‘‘trigger’’ was chosen

to reward refineries who demonstrate

compliance using technology designed

to meet the 30 ppm standard before

2005. Once this 60 ppm trigger is

reached, allotments will be calculated

based on the amount of reduction from

120 ppm. 84 However, these allotments

may be discounted depending on the

actual sulfur level. If a refinery fully

demonstrates compliance by producing

gasoline with an annual average sulfur

level of 0 to 30 ppm, the allotments

retain their full value—they are not

discounted at all. For actual sulfur

levels of 31–60 ppm, which are

indicative of a partial demonstration of

compliance with the ultimate low sulfur

standard, the allotments are discounted

20 percent. For example, consider a

refinery that has an average sulfur level

of 50 ppm at the end of 2003. That

refinery would have generated 56 sulfur

allotments [(120 ppm ¥ 50 ppm) × 0.8

× Volume (in gallons)] to be used or sold

in 2004. If that same refinery instead

produced fuel with an average sulfur

level of 20 ppm at the end of 2003, then

it would have generated 100 sulfur

allotments [(120 ppm ¥ 20 ppm) ×

volume (in gallons)] to be used or sold

in 2004.

ii. Generating Allotments in 2004 and

2005

For 2004 and 2005, refiners or

importers (but not individual refineries)

6760 Federal Register / Vol. 65, No. 28 / Thursday, February 10, 2000 / Rules and Regulations

85Allotments used for GPA gasoline compliance

may be retained until February 2007. Allotments

used for small refiner gasoline compliance may be

retained until February 2008.

can generate allotments by producing

gasoline that has a sulfur level below

the annual corporate average standard

(120 ppm and 90 ppm). The number of

allotments generated is equal to the

difference between 120 ppm (or 90

ppm) and the corporate average sulfur

level. Allotments generated by refiners

or importers in 2004 and 2005 are not

discounted, unlike some of those that

are generated by refineries in 2003.

Refiners that sell fuel to the GPA may

also generate allotments by producing

fuel that is cleaner than the corporate

average standards, regardless of the

volume of fuel that is produced for use

in the GPA. On the other hand, as

explained in Section IV.C.2., gasoline

produced by small refiners who are

complying with the standards in Table

IV.C.–3 cannot be used to generate

sulfur allotments since these producers

are not required to meet a corporate

average standard.

iii. Using Allotments in 2004 and 2005

Refiners and importers can use sulfur

allotments that they generate or

purchase from other refiners/importers

to demonstrate compliance with the 120

ppm corporate standard in 2004 and the

90 ppm corporate standard in 2005.

Each refiner’s sulfur allotment for 2004

and 2005 will be calculated based on

the total volume of gasoline imported

and produced at their refineries (or only

imported gasoline in the case of

companies that only import gasoline)

and the corporate pool average standard

for that year. In anticipation of

exceeding or falling short of the

standard for any one year, companies

may trade sulfur allotments, either in

the compliance year or earlier (as early

as the year 2000). For example, a refiner

that expects to produce a total of 2.5

billion gallons of gasoline in 2004 has

a sulfur allotment of 300 billion ppmgallons (120 ppm × 2.5 billion gallons).

If its corporate pool average is actually

200 ppm in 2004, it will exceed its 2004

allotment by 200 billion ppm-gallons

(since 200 ppm × 2.5 billion gallons =

500 ppm-gallons), and must obtain

sulfur allotments from another refiner to

offset this increase. Similarly, if this

refiner expects to average 80 ppm in

2004, it has an excess of 100 billion

ppm-gallons to trade to other refiners.

However, if a refiner trades away part of

its allotment, the refiner must still

comply with the corporate standard, just

as another refiner has to do if it does not

trade allotments.

In 2005, refiners must comply both

with the corporate average standard and

the refinery average standard for each of

their refineries. Once a refiner has

established compliance with the 90 ppm

corporate average standard (with or

without the use of allotments), each of

its refineries can then establish

compliance with the 30 ppm refinery

standard through actual production of

30 ppm gasoline or through the use of

excess allotments and/or sulfur credits.

Once compliance with the 90 ppm

corporate pool average standard is

established, the refiner would use 90

ppm as each of its refineries actual

sulfur level, then apply an appropriate

number of credits or allotments to meet

the 30 ppm refinery average standard for

each refinery. (See discussion below for

an explanation of how a refiner can use

both sulfur ABT credits and allotments

to comply with the refinery average

standard in 2005.)

iv. How Long Do Allotments Last?

We expect most refiners will trade

sulfur allotments well before the end of

each compliance year so they will have

the needed certainty of compliance with

the corporate average standard. Our

program allows such trades to occur at

any time during the year, although the

refiner is liable for any shortfall in

compliance resulting from having

traded away too many allotments. A

refiner may also carry over excess 2004

allotments (those generated in 2003 or

2004) for compliance with the 90 ppm

corporate standard for 2005. However,

those allotments must be discounted by

50 percent. This 50 percent discount

factor is needed to equalize the emission

impact of sulfur control between 2004

and 2005. In 2005, there is an extra

model year of NLEV/Tier 2 vehicles

relative to 2004. In addition, the NLEV/

Tier 2 fleet is one year older in 2005

than 2004. This increased age translates

into higher vehicle emissions due to

general deterioration. Since sulfur acts

on a percentage basis, the absolute

emission increase due to sulfur impacts

on vehicle emission control systems in

2005 is higher than in 2004.

As discussed below in section

IV.C.1.c.x, a refiner or importer may

convert allotments into credits in 2004

and 2005 for compliance with the

refinery average standards in 2005 and

beyond. All transactions between

refiners involving sulfur allotments

must conclude by the last day of

February in the calendar year following

the compliance year in which the

allotments are to be used.85

Sulfur Credit Program

v. Establishing Individual Refinery

Sulfur Baselines for Credit Generation

Purposes

The purpose of establishing a sulfur

baseline for each refinery is to provide

a starting point for determining sulfur

credits for reductions in gasoline sulfur

levels. We proposed that refiners would

have to establish a sulfur baseline for

each individual refinery, by submitting

to us data establishing their annual

average gasoline sulfur level based on

the average of their 1997 and 1998

operations. We would review the data

and, barring any discrepancies, approve

a sulfur baseline for each refinery. We

received comments supporting this

option as well as comments stating that

the time involved for this application

and approval process would delay the

refiner’s ability to plan for and begin

construction of gasoline desulfurization

technology. Refiners would want the

certainty of an approved sulfur baseline

before making investment decisions,

and thus would wait to obtain EPA’s

approval before proceeding. We also

received comments about what year(s)

would be most appropriate to use to

establish a sulfur baseline. Some of

these comments argued for the use of

existing, approved 1990 baselines, or

some adjusted version of 1990 baselines,

rather than new data, to expedite the

process of establishing sulfur baselines.

We also proposed a different sulfur

baseline for reformulated gasoline (RFG)

produced in the summer for those

refineries which produce reformulated

gasoline. While the conventional

gasoline sulfur baseline (and the

baseline for winter RFG) was proposed

to be tied to current sulfur levels, the

baseline for summer reformulated

gasoline was proposed to be 150 ppm,

the approximate level we expect

summer reformulated gasoline to

contain in 2000 and beyond because of

the Phase II reformulated gasoline

requirements, which take effect in 2000.

We argued that winter RFG did not have

any de facto sulfur restrictions, and thus

winter RFG should be counted with

conventional gasoline for the purpose of

credit generation relative to the

refinery’s conventional gasoline sulfur

baseline.

Since the proposal, we have learned

that overall gasoline sulfur levels

(conventional plus reformulated) are

significantly lower than they were in

1990. As explained in the Regulatory

Impact Analysis, national average sulfur

levels when both conventional and

reformulated gasolines are considered

dropped to 306 ppm in 1997 and 268

ppm in 1998, compared to the 1990

Federal Register / Vol. 65, No. 28 / Thursday, February 10, 2000 / Rules and Regulations 6761

86Refiners may, however, include oxygen added

downstream of the refinery when determining

Continued

national gasoline sulfur average of 339

ppm, decreases of 10 and 21 percent,

respectively. The substantial drop

between 1997 and 1998 seems to be

related to the mandatory use of the

Complex Model, which began in 1998

and had implications for both

reformulated and conventional gasoline

compliance. Thus, we have become

convinced that the most appropriate

sulfur baseline would be based on data

which establish current sulfur levels,

not on data which are nearly ten years

old. We considered reducing all 1990

baselines by 21 percent to reflect the

national average decrease since 1990,

but determined that this approach

would be inappropriate because some

refiners have reduced levels

substantially more than 10–21 percent

since 1990, and would thus be eligible

to generate a very large number of

credits for reductions that have already

been made.

Furthermore, as we proposed, and

some commenters argued, we have

concluded that averaging data from two

years is the most appropriate approach,

because averaging over two years will

help to account for any unusual

variations in operations that may have

occurred at individual refineries in

either of these years. We concluded that

averaging data from 1998 and 1999 is

not feasible, because the 1999 data will

not be fully available to EPA until after

the reporting deadline of May 2000.

Hence, we believe it is preferable to use

1997 and 1998 data, rather than

delaying the time baselines are

established. We do not expect

significant changes in 1999 sulfur levels

relative to 1998 levels, so we believe the

use of the 1997–1998 data provides a

reasonable representation of current

sulfur levels.

We have also learned that summer

reformulated gasoline is already

averaging close to our expected sulfur

level for the year 2000. Winter RFG does

not show this same decrease,

presumably because refiners are shifting

high sulfur blendstocks out of RFG in

the summer but back into RFG in the

winter to maintain compliance with the

conventional gasoline antidumping

requirements. Thus, it appears that if we

held summer RFG to a lower baseline,

as proposed, we would have to raise the

winter RFG baseline commensurately to

reflect actual refinery operations. The

net environmental impact would be no

different than if we had a single sulfur

baseline applying to all RFG, or to all

gasoline produced at the refinery, since

the annual pool sulfur levels are

constant even while there may be

seasonal variations. Therefore, we are

not finalizing a separate sulfur baseline

for summer RFG, but rather combined

conventional and reformulated gasoline

sulfur levels.

Having considered the comments we

received and the new data available to

us, we have concluded that refiner

sulfur baselines should be established

from 1997 and 1998 operating data.

Hence, we are requiring refiners which

wish to generate sulfur credits prior to

2004 to establish a 1997–98 sulfur

baseline for each refinery at which they

intend to generate credits. We believe

the process we have defined will

minimize the burden to the industry

and the time it will take for us to review

and approve the sulfur baselines.

Specifically, refiners which plan to

generate sulfur credits must submit to

us information which establishes the

batch report numbers, sulfur levels, and

volumes of each batch of gasoline

produced in 1997 and 1998, as well as

the annual average sulfur level

calculated from these data. Within 60

days, we will review the application

and notify the refiner of approval or of

any discrepancies we find in the data

submitted. If we do not respond within

60 days, the baseline should be

considered to be approved.

While we expect most refiners will

apply for a sulfur baseline in the near

future (to maximize the time that they

can generate credits before 2004), there

is no cut-off date for applying for a

sulfur baseline. However, if the refiner

wishes to generate credits for a given

calendar year, we must receive his

baseline application no later than

September 30 of that year to provide us

adequate time to review the baseline

prior to the end of the year (at which

time any credits generated in that year

would be assessed and reported by the

refiner). We believe that this approach

for establishing sulfur baselines meets

our goal of providing a workable ABT

program that refiners can take advantage

beginning in the year 2000, without

sacrificing the environmental benefits of

the sulfur standards.

Foreign refiners which have already

established an individual refinery

baseline with us, and thus have

submitted reports on all batches of

gasoline sent to the U.S. in 1997 and

1998, may follow this same procedure if

they wish to generate sulfur credits

prior to 2004. Foreign refiners which

have not reported 1997–98 gasoline

qualities to us must follow an alternate

approach. Specifically, they must follow

the general requirements of our protocol

for establishing individual refinery

baselines (see §§ 80.91–94 and also

§ 80.410) by providing sufficient data to

establish the volume of gasoline

imported to the U.S. from each refinery

in 1997–98 and the annual average

sulfur level of that gasoline. If the test

method used to identify the sulfur level

differs from the one specified in today’s

action, the refiner must provide

sufficient information about the test

method to allow us to evaluate the

appropriateness of the alternative.

Because this information will be new to

us, we may require more time to review

and approve their 1997–98 sulfur

baseline. But, consistent with our

previous handling of foreign refiner

submissions, once we have determined

that the submission is complete and the

protocol has been followed, they may

use the baseline while waiting for our

formal approval. However, the refiner

will be held to the baseline that is

ultimately approved. A foreign refiner

who is unable to generate adequate data

to establish a 1997–98 sulfur baseline

will not be permitted to generate sulfur

credits in 2000–2003.

Small refiners that plan to request

small refiner standards (as provided in

Section IV.C.2 below) which also want

to generate early sulfur ABT credits will

use the same data required to define

their small refiner baseline to determine

their baseline for the ABT program. In

other words, if a refiner becomes a small

refiner under our definition and

procedures, credits generated by that

refinery would be calculated relative to

the refinery’s actual 1997–98 sulfur

average. The trigger for generating sulfur

credits under the ABT program

(discussed in the next section) would

still apply for small refiners generating

credits prior to 2004 relative to their

1997–98 sulfur average. In addition, the

applicable interim sulfur standard for

small refiners who generate credits

through sulfur reductions prior to 2004

will be calculated based on the reduced

sulfur level, rather than the 1997–98

baseline level, as explained below in

Section IV.C.2.

Importers and gasoline blenders will

not be assigned a sulfur baseline

because they are not eligible to generate

early credits (prior to 2004) under the

ABT program. This includes gasoline

refiners who are also importers; such

parties cannot generate sulfur credits

prior to 2004 on the basis of their

imported gasoline but may only

generate credits based on the gasoline

produced by their refinery(ies). It also

includes oxygenate blenders, who, as

discussed in Section VI below, are not

subject to the sulfur standards but are

responsible for compliance with the

downstream provisions.86 For importers

6762 Federal Register / Vol. 65, No. 28 / Thursday, February 10, 2000 / Rules and Regulations

compliance with the sulfur standards and the

provisions of the ABT program. This is consistent

with existing provisions for reformulated and

conventional gasolines.

87As explained in Section IV.C.1.c.ix, credits

generated before 2004 expire in 2006, except for

small refiners and credits used for GPA gasoline

compliance.

and most gasoline blenders, this

represents a change from our proposal,

but one we believe is appropriate and

necessary to ensure that the

environmental benefits of the ABT

program are maintained. The ABT

program allows the refining industry to

trade off early sulfur reductions (2000–

2003) for slight delays in complying

with the 30 ppm refinery average

standard in 2005–2006.87 We have

designed the ABT program to ensure

that sufficient credits can be generated

by refiners (domestic or foreign) to

enable a smooth transition to the 30

ppm standard. Importers and blenders

do not have the same need for the ABT

program that refiners have because they

will not have to make the same level of

investment in desulfurization

technology and thus do not need credits

generated before 2004 to help their

transition to the 30 ppm average

standard after 2004. Furthermore,

credits could be generated by importers

without the overall pool of imported

gasoline becoming incrementally

cleaner. For example, say that Importer

A had a 1997/98 sulfur baseline of 600

ppm and Importer B had a sulfur

baseline of 100 ppm. In 2002, Importer

B could transfer/sell its 100 ppm

gasoline to Importer A prior to

unloading the fuel at the port of entry.

Once the import transaction was

completed, Importer A will have

generated 500 ppm (multiplied by the

fuel volume) credits without any fuel

becoming incrementally cleaner. We are

concerned that if importers and

blenders were allowed to generate early

credits, they would generate far more

credits than needed to make the ABT

program work, without necessarily

achieving early environmental

benefits—credits which either importers

or refiners would be able to use to delay

compliance with the 30 ppm standard

in 2005 and beyond. This would delay

the environmental benefits of our

program by prolonging the industry’s

transition to the 30 ppm standard.

In the proposal, we also discussed the

need for a baseline gasoline volume as

well as a baseline sulfur level. This

stemmed from the design of our current

conventional gasoline anti-dumping

program, which requires a baseline

volume so that we can confirm that

conventional gasoline is no dirtier now

than it was in 1990. However, for the

gasoline sulfur ABT program, we have

determined that there is no need to

restrict refineries’ sulfur baselines

(against which they can generate sulfur

credits) to a specific volume of gasoline.

The purpose of the ABT program is to

encourage early sulfur reductions by

some refineries, and we see no need to

limit the amount of credits such a

refinery can generate on the basis of a

historic volume of gasoline production.

In fact, additional volumes of cleaner

gasoline should achieve additional early

environmental benefits.

vi. Generating Sulfur Credits Prior to

2004

In our proposal, we discussed a credit

generation trigger of 150 ppm for early

credit generation (2000–2003), arguing

that we wanted to encourage investment

in desulfurization technologies that

refineries ultimately need to get to a 30

ppm average. Many comments we

received argued that the 150 ppm trigger

was too restrictive, requiring capital

investments that most refiners could not

make earlier than 2004 (due to

construction limitations, among other

reasons). Thus, few credits would be

generated, and without sufficient

certainty that credits would be

generated, refiners would not be able to

count on the flexibility that the ABT

program was intended to provide when

planning their compliance strategies for

2004 and beyond.

Having considered these comments

and reanalyzed the ability of the

industry to comply with the standards

in 2004 (as we discussed above at the

introduction to section IV.C.1), we have

concluded that the proposed 150 ppm

trigger would inappropriately limit the

credits available. While we want to

encourage refiners to make reductions

early, we do not want to preclude

refiners from making less capital

intensive sulfur reductions in the short

term while they prepare to reach the 30

ppm average in the long term. At the

same time, we believe that a refinery

should be required to demonstrate that

the sulfur reduction was real and not

just a consequence of national variations

from year to year. Hence, we are

establishing a trigger which we believe

represents a sulfur reduction that

requires action above and beyond

simple annual or even seasonal

fluctuations in crude oil sulfur level or

product slate variations that could have

a very small impact on annual sulfur

average.

During the period 2000–2003, credits

can be generated annually by any

refinery that produces gasoline

averaging at least 10 percent lower than

that refinery’s baseline sulfur level. In

other words, to generate credits, the

refinery’s annual average sulfur level for

all of its gasoline on average must be 0.9

× (baseline sulfur level). Once this

‘‘trigger’’ is reached, credits will be

calculated based on the amount of

reduction from the refinery’s sulfur

baseline. For example, if in 2002 a

refinery reduced its annual average

sulfur level from a baseline of 450 ppm

to 150 ppm (well below the trigger of

0.9×450=405 ppm), its sulfur credits

will be determined based on the

difference in annual sulfur level (450–

150=300 ppm) multiplied by the volume

of gasoline produced in 2002. Similarly,

foreign refineries with an individual

sulfur baseline can generate credits in

these years as long as the annual average

sulfur level of the gasoline imported to

the U.S. from that refinery is lower than

90 percent of the baseline sulfur level.

Although by adopting a more modest

trigger for credit generation we are

enabling more credits to be generated,

the environment will still benefit from

our program. Although the use of a more

modest trigger keyed to each refinery’s

sulfur baseline may allow more credits

to be generated, we believe this will

only occur because the credit program is

providing incentives to refineries to

reduce sulfur levels earlier than they

would have otherwise, particularly with

a strict 150 ppm trigger. Thus, more

lower sulfur gasoline will be in the

marketplace prior to 2004 than would

otherwise have occurred, given our

understanding of the state of

desulfurization technologies and the

likely pattern of investments by the

industry. With our corporate average

and cap standards, sulfur levels will

continue to decrease after 2004, even if

individual refineries take an added year

or two to meet the 30 ppm standard.

We had also proposed that credit

generation prior to 2004 would be

different for reformulated gasoline than

for conventional gasoline, because

reformulated gasoline’s assigned sulfur

baseline was proposed to be 150 ppm.

Thus, we proposed that credits could

only be generated from reformulated

gasoline if the sulfur level averaged

below 150 ppm, and that the credits

would be calculated based on the

difference between 150 ppm and the

new, lower average. Since we have not

finalized a separate baseline for

reformulated gasolines, we are not

adopting a different process for

generating credits from reformulated

gasoline. All gasoline produced at the

refinery in 2000 (and beyond) is

considered in calculating the annual

average sulfur level, compliance with

the 90 percent trigger, and the sulfur

credits earned, if any.

Federal Register / Vol. 65, No. 28 / Thursday, February 10, 2000 / Rules and Regulations 6763

88Excluding California.

Several states have adopted or are

considering adopting gasoline sulfur

control programs (see discussion at

section IV.C.1.d below on state sulfur

programs). While we had proposed to

exclude this gasoline from sulfur credit

generation, we have reconsidered our

position. Gasoline produced in response

to state 88 requirements can be included

in the refinery’s calculation of sulfur

credits generated in a given year.

However, this gasoline will be included

in the total volume of gasoline produced

by that refinery, requiring the annual

average sulfur level for total gasoline

produced at that refinery to exceed the

trigger specified above to generate any

credits at all.

vii. Generating Sulfur Credits in 2004

and Beyond

In 2004 and beyond, refineries,

blenders, and importers can generate

credits, but only if the actual annual

sulfur level of all gasoline produced or

imported averages below 30 ppm, and

only for the difference between the

standard and the actual annual sulfur

average. (For example, a refinery

producing gasoline in 2005 that

averages 25 ppm can generate 30–25=5

ppm sulfur credits on the total volume

of gasoline produced at that refinery.)

However, since in 2004 and beyond

importers are the regulated party

responsible for ensuring that imported

gasoline meets the sulfur standards,

foreign gasoline would in effect generate

sulfur credits through the importer

beginning in 2004. Foreign refineries

which want to send gasoline containing

less than 30 ppm sulfur to the U.S.

would still benefit from doing so by

making appropriate arrangements with

importers, which are subject to all of our

standards.

viii. Using Sulfur Credits

Refineries, blenders, and importers

can use sulfur credits to demonstrate

compliance with the 30 ppm annual

average refinery standard in 2005 and

beyond, if they are unable to meet the

standard with actual gasoline

production. During 2005 and 2006 only,

refineries may use credits banked by

that refinery in 2000–2003 as a result of

early sulfur reductions, or credits

purchased from other refineries which

have banked early sulfur credits.

Blenders and importers can purchase

credits from refiners (including any

foreign refiners which generated early

credits), or use credits they generated in

2004 and beyond. All transactions will

have to be concluded by the last day of

February after the close of the annual

compliance period (2005, 2006, etc.).

As discussed above, 2005 is the only

year when averaging and trading against

the corporate average and averaging,

banking, and trading against the refinery

average are both allowed. In that year,

sulfur credits may only be used against

the 30 ppm standard for each refinery

once the refiner has demonstrated

compliance with the corporate pool

average standard. The refiner must meet

his corporate average based on actual

sulfur levels or through a trade for

sulfur allotments if it falls short of the

90 ppm corporate average standard. At

that point, each of his refineries is

evaluated for compliance with the 30

ppm refinery average standard. Those

refineries that are not producing

gasoline averaging 30 ppm sulfur must

obtain sulfur credits generated in 2005

or earlier and/or sulfur allotments to

bring the refinery’s sulfur average from

the actual level (a maximum of 90 ppm

for each refinery, since by meeting the

corporate average, even if in part

through the use of allotments, each

refinery in the company will be

considered to average no more than 90

ppm) down to 30 ppm.

Refineries or importers which sell

some or all of their gasoline in the GPA

(and which have elected to participate

in the phase-in) may also use sulfur

credits to meet their refinery averages in

2004–2006. However, because this

gasoline must be designated for sale in

the GPA, they must account separately

for compliance with the 150 ppm

refinery average for gasoline sold in the

phase-in area and with the 30 ppm

refinery average for gasoline sold

outside of that area. Thus, in 2004, such

refiners/importers may use sulfur

credits to establish compliance with the

150 ppm standard for gasoline sold in

the phase-in area, if required. In 2005

and 2006, they may use credits to meet

the 150 ppm standard for gasoline sold

in the area and/or use credits to meet

the 30 ppm standard for gasoline sold

outside of the area.

As explained in section IV.C.1.b.,

some of the refiners participating in the

GPA are exempt from the corporate

average standards, but may use either

sulfur credits or sulfur allotments in

2004–2006 to establish compliance with

the 150 ppm refinery average standard.

Those that are not exempt from the

corporate average standards may use

sulfur allotments only to meet the

corporate average standards. For such

refiners, compliance with the corporate

average standard will be measured first

(using allotments if needed), then

compliance with the refinery average

standard (using credits and/or

allotments as needed) in the same

manner as described above for refiners

who sell all of their gasoline outside of

the GPA.

Foreign refineries are not required to

comply with the 30 ppm refinery

standard in 2005 and beyond; instead,

compliance for foreign gasoline is

required by the importer. Sulfur credits

generated by foreign refineries prior to

2004 will still have value, since these

refineries can sell sulfur credits to U.S.

refineries, blenders, or importers who

need credits to meet the standard in

2005 or beyond. In fact, foreign refiner’s

credits could simply be transferred to

the importer which is importing that

refinery’s gasoline into the U.S. For

example, a foreign refiner could send

gasoline exceeding 30 ppm on average

to an importer and transfer the

appropriate amount of sulfur credits it

generated prior to 2004 to allow the

importer to meet the 30 ppm standard.

Similarly, after 2004 a foreign refiner

may send gasoline containing less than

30 ppm to the U.S. through an importer,

and the importer would benefit from

generating credits (and presumably

would include the value of these credits

in the financial transaction with the

foreign refinery).

As explained in Section IV.C.3.b.

above, in 2005 no batch of domestically

produced or imported gasoline can

exceed 300 ppm, and a refiner’s/

importer’s annual corporate pool

average sulfur level cannot exceed 90

ppm, except for gasoline sold in the

GPA or by small refiners complying

with the standards in Table IV.C.–3. In

2006 and beyond, sulfur is capped at 80

ppm and there is no longer a corporate

pool average standard. These standards

(as well as the 300 ppm cap and

corporate pool averages) cannot be met

through the use of credits generated

under the ABT program. As described

above, credits may only be applied to

demonstrate compliance with the 30

ppm refinery standard, not to the

corporate pool average or the cap. Given

the limitations that the 80 ppm cap

places on sulfur levels in 2006 and

beyond, we do not expect many sulfur

credits to be used in future years of this

program (since, even with the use of

credits, no gasoline may exceed 80 ppm

in these years).

We allow an individual refinery that

does not meet the 30 ppm standard in

a particular year to carry forward the

credit debt one year. Under this

provision, the refinery will have to

make up the credit deficit and come into

compliance with the 30 ppm standard

the next calendar year, or face penalties.

This provision will in no way absolve

the refiner from having to meet the

6764 Federal Register / Vol. 65, No. 28 / Thursday, February 10, 2000 / Rules and Regulations

applicable per-gallon cap standard or,

when applicable, the corporate average

standard. This provision will provide

some relief for refiners faced with an

unexpected shutdown or that otherwise

were unable to obtain sufficient credits

to meet the 30 ppm standard. This

provision is only available through

2010. After that time, we expect many

refineries to be able to consistently

operate below 30 ppm, generating a pool

of credits which other refineries could

purchase in the event of an unforeseen

upset. However, in no circumstances

after 2005 can the refinery produce

gasoline exceeding the 80 ppm pergallon cap standard (with the exception

of small refiners, as discussed in Section

IV.C.2 below). The carry-forward

provision does not apply to compliance

with the 150 ppm refinery average

standard applicable in the GPA.

We have some concern that the

potential exists for credits to be

generated by one party and

subsequently purchased or used in good

faith by another, and later found to have

been calculated or created improperly or

otherwise determined to be invalid. For

this reason, we proposed that both the

seller and purchaser would have to

adjust their sulfur calculations to reflect

the proper credits and either party (or

both) could be deemed in violation of

the standards and other requirements if

the adjusted calculations demonstrate

noncompliance with an applicable

standard. One commenter, representing

a number of refiners, objected to this

approach.

Nevertheless, our strong preference is

to hold the credit or allotment seller

liable for the violation, as opposed to

the credit or allotment purchaser. As a

general matter we would expect to

enforce a shortfall in compliance

calculations (caused by the good faith

purchase of invalid credits) against a

good faith purchaser only in cases

where we are unable to recover valid

credits from the seller to cover the

compliance shortfall. Moreover, in

settlement of such cases we would

strongly encourage the seller to

purchase credits to cover the good faith

purchaser’s credit shortfall. Under the

deficit provisions of section 80.205(e),

for compliance periods through 2010, a

credit shortfall may be corrected if the

conditions of that section are met. EPA

will consider covering a credit deficit

through the purchase of valid credits a

very important factor in mitigation of

any case against a good faith purchaser,

whether the purchase of valid credits is

made by the seller or by the purchaser.

Some commenters stated that sulfur

credits should be transferred directly

from the refiner or importer that

generated them to the party that will use

them, as we had proposed. We believe

that this helps to ensure that parties

purchasing credits will be better able to

assess the likelihood that the credits

will be valid, and aids compliance

monitoring. Therefore, the final rule

adopts this provision, with the

exception that where a credit generator

transfers credits to a refiner or importer

who cannot use all the credits, that

transferee may transfer the credits to

another refiner or importer. That second

transferee cannot again transfer the

credits; they must either be used or

terminated by the second transferee.

Nevertheless, there is nothing in the

final rule that would prevent a person

who is not a refiner or importer from

facilitating the transfer of credits from

parties that have generated them to

parties who need them for compliance,

e.g., a broker who would act like a real

estate broker. Therefore, under today’s

rule, any person may act as a credit or

allotment broker, whether or not such

person is a refiner or importer, so long

as the title to the credits or allotments

are transferred directly from the

generator to the user. Furthermore, any

party (e.g., refiner, importer, or blender)

who can generate and hold credits may

also resell them.

ix. How Long Do Credits Last?

The ABT program is designed to

encourage sulfur reductions earlier than

the standards require, by providing a

market for credit generation. The

emissions benefits of these early

reductions are most valuable in the

early years of the ABT program when

national average levels remain

substantially higher than the final 30

ppm average standard. At the same

time, these emissions reductions are

offset in time by higher emissions

incurred by later vehicles which use

gasoline with a higher sulfur level.

Because the overall intention of the

gasoline sulfur program is to enable and

protect Tier 2 vehicles and provide time

for refiners to select and construct

desulfurization equipment, sulfur

credits should have a limited life to

limit the degree to which later Tier 2

vehicles are exposed to higher sulfur

levels.

The ABT program is also designed to

ease implementation of the new

standards, particularly the refinery

average standard, and the credits will be

of their greatest value to refineries

during the first few years of the

program. ABT is not intended to permit

a refinery to operate substantially above

the standard for a protracted time

period. While limiting credit life may

reduce the incentive to generate credits

for some refineries, the credit program

will be of relatively small value to any

refinery/importer that held credits for a

protracted period of time and did not

need to use them. This is particularly

true in 2006 and beyond, when the 80

ppm cap limits the need for and value

of any credits the refinery may possess.

Hence, we are finalizing limitations

on the life of credits which differ

somewhat from our proposal. Credits

generated prior to 2004 must be used for

compliance purposes and calculations

with respect to gasoline produced on or

before December 31, 2006. These credits

can be used to meet the 30 ppm

standard in 2005 or 2006. This

expiration date applies to credits used

by the refinery which generated the

credits, as well as credits transferred to

another refinery. While the proposal

presented a life through 2007 for credits

generated early, we have shortened this

life span one year to reflect the fact that

early credits are intended to enable and

ease compliance with the 30 ppm

standard in the first years of the

program, allowing refiners to spread out

investments without compromising the

environmental benefits of the program.

At the beginning of 2006, all gasoline

(except that produced by small refiners

and that marketed in the GPA) will be

capped at 80 ppm, and by the end of

2006, every refinery should be capable

of producing gasoline that meets the 30

ppm standard. Hence, the value of the

early credits diminishes greatly. It

should be noted that early credits can be

used for GPA certified gasoline through

2006 and for small refiner gasoline

through 2007.

Credits generated in 2004 and beyond

will have to be used within five years

of the year in which they were

generated. If these credits are traded to

another party during that five year

period, they will have to be used by the

new owner within that same five years,

regardless of when the transfer occurs.

This is a change from our proposal,

which provided for a potential

maximum ten-year life for credits that

were generated and then traded in the

fifth year to another party. However, we

believe this approach is more consistent

with our environmental goals of keeping

sulfur levels averaging 30 ppm in 2006

and beyond. With the 80 ppm cap,

refiners will be able to use only very few

credits if they are unable to meet the 30

ppm average in 2006 or beyond.

Therefore, limiting credit life to five

years will likely have minimal impact

on the actual use of credits. A longer

credit life will make tracking and

enforcement difficult, and could have

negative environmental consequences.

Hence, we have limited credit life to

Federal Register / Vol. 65, No. 28 / Thursday, February 10, 2000 / Rules and Regulations 6765

89The term ‘‘state’’ or ‘‘states’’ includes political

subdivisions thereof.

90 In evaluating whether a state fuel prohibition

or control is ‘‘identical’’ to a prohibition or control

adopted by EPA, EPA might consider but is not

limited to the following factors in comparing the

measures: (1) The level of an emission reduction or

pollution control standard; (2) the use of ‘‘per

gallon’’ or ‘‘averaged’’ amounts in setting that level;

(3) the effect on that level (if averaged) of the use

of different averaging pools; (4) the lead time

allowed to the affected industry for compliance;

and (5) the test method(s) and sampling

requirements used in determining compliance.

91 In addition, EPA notes that there are existing

federal NOX performance standards which apply to

RFG and conventional gasoline and that state

controls respecting NOX performance are also

preempted under 211(c)(4)(A).

five years. Consistent with our other

recordkeeping and reporting

requirements, the five-year expiration

date will be assessed as of the last day

of February after the five year deadline.

Hence, for example, credits generated in

2005 will expire as of the last day of

February, 2011. Again, no third-party

transfers are allowed.

x. Conversion of Allotments Into Credits

A refiner or importer may convert

allotments into credits for compliance

with the refinery average standards in

2005 and beyond. Allotments that are

generated by reducing gasoline sulfur

levels to 30 ppm or higher (defined as

Type ‘‘A’’ allotments) are equivalent to

credits generated in 2000–2003. These

allotments may be (1) used as allotments

by a refiner for compliance with the

corporate average standard in 2004 and

2005 or (2) converted into credits to be

used by the refiner’s refineries for

compliance with the refinery average

standard in 2005 and 2006.

Allotments that are generated by

reducing gasoline sulfur levels to lower

than 30 ppm (defined as Type ‘‘B’’

allotments) are equivalent to credits

generated in 2004 and beyond (by

producing gasoline with less than 30

ppm sulfur). Similar to Type ‘‘A’’

allotments, these allotments may be (1)

used as allotments by a refiner for

compliance with the corporate average

standard in 2004 and 2005 or (2)

converted into credits to be used by the

refiner’s refineries for compliance with

the refinery average standard in 2005

and beyond.

Allotments or credits that are used by

refiners for compliance with the GPA

gasoline standards must be used by the

last day of February 2007. Allotments or

credits used by small refiners for

compliance with the small refiner

standards must be used by the last day

of February 2008. Any allotments,

whether Type ‘‘A’’ or ‘‘B’’, that are

carried over for compliance with the

corporate and refinery average standards

for 2005 must be discounted by 50

percent as discussed in above. Any

allotments that are converted to credits

(e.g., in 2004) and then carried over to

2005 are not discounted. However, once

the conversion and carry-over has taken

place (such that the allotments have

become credits), the conversion cannot

be reversed without applying the

discount factor. That is to say, once a

2003 or 2004 allotment is converted to

a credit and carried over to 2005, the

credit can only be re-converted into an

allotment that is discounted 50 percent.

d. How Are State Sulfur Programs

Affected by EPA’s Program?

Section 211(c)(4)(A) of the CAA

prohibits states 89 from prescribing or

attempting to enforce controls or

prohibitions respecting any fuel

characteristic or component if EPA has

prescribed a control or prohibition

applicable to such fuel characteristic or

component under section 211(c)(1). This

preemption applies to all states except

California, as explained in section

211(c)(4)(B). For states other than

California, the Act provides two

mechanisms for avoiding preemption.

First, section 211(c)(4)(A)(ii) creates an

exception to preemption for state

prohibitions or controls that are

identical 90 to the prohibition or control

adopted by EPA. Second, states may

seek EPA approval of SIP revisions

containing fuel control measures, as

described in section 211(c)(4)(C). EPA

may approve such SIP revisions, and

thereby ‘‘waive’’ preemption, only if it

finds the state control or prohibition ‘‘is

necessary to achieve the national

primary or secondary ambient air

quality standard which the plan

implements.’’

We are adopting the sulfur standards

pursuant to our authority under section

211(c)(1). Thus, we believe that today’s

action results in the clear preemption of

future state actions to prescribe or

enforce fuel sulfur controls. 91 States

with fuel sulfur control programs not

already approved into their SIPs will

therefore need to obtain a waiver from

us under the provisions described in

section 211(c)(4)(C) for all state fuel

sulfur control measures, unless the state

standard is identical to our sulfur

standard.

Section 211(c)(4)(A) preempts state

fuel controls if EPA has ‘‘prescribed’’

federal controls. We read this language

to preempt non-identical state standards

on the date of promulgation of the

standards, as opposed to the date the

standards become enforceable. Thus,

today’s action preempts state actions as

of December 21, 1999, even though the

standards will not require sulfur

reductions until 2004. This

interpretation is consistent with EPA

actions applying other federal fuel

measures. See 54 Fed. Reg. 19173 (May

4, 1989) (noting preemption of

Massachusetts state RVP measure before

start of first control period for federal

RVP). We also believe this interpretation

is consistent with the intent behind

section 211(c)(4)(A). Though the

standards are not immediately

enforceable, they will have an

immediate impact on refiners’

investment decisions. We believe, by

adopting 211(c)(4)(A), Congress

intended to limit state fuel controls that

differ from the federal programs, for

example, in the judgments as to level of

the standard or its stringency. The lead

time to implement a standard should be

treated the same way.

Aside from the explicit preemption in

Section 211(c)(4)(A), a court could also

consider whether a state sulfur control

is implicitly preempted under the

Supremacy Clause of the U.S.

Constitution. Courts have determined

that a state law is preempted by federal

law where the state requirement

actually conflicts with federal law by

preventing compliance with both

federal and state requirements, or by

standing as an obstacle to

accomplishment of Congressional

objectives. A court could thus consider

whether a given state sulfur control is

preempted, notwithstanding waiver of

preemption under 211(c)(4)(C), if it

places such significant cost and

investment burdens on refiners that

refiners cannot meet both state and

federal requirements in time, or if the

state control would otherwise meet the

criteria for conflict preemption.

2. Hardship Provision for Qualifying

Refiners

This section describes various

provisions for certain qualifying refiners

who may face hardship circumstances.

a. Hardship Provision for Qualifying

Small Refiners

In developing our gasoline sulfur

program, we evaluated the need and the

ability of refiners to meet the 30/80

standards as expeditiously as possible.

This analysis is described in detail in

the RIA. As a part of this analysis, we

found that while the majority of refiners

would be able to meet the needed air

quality goals in the 2004–2006 time

frame, there would be some refiners

who would face particularly difficult

circumstances which would cause them

to have more difficulty, in comparison

6766 Federal Register / Vol. 65, No. 28 / Thursday, February 10, 2000 / Rules and Regulations

to the industry as a whole, in meeting

the standards.

In order to ensure that the vast

majority of the program could be

implemented reasonably quickly in

order to achieve the air quality benefits

sooner, rather than basing the time

frame on the lowest common

denominator we have provided an

extended phase-in for a small group of

refiners that represents less than four

percent of the overall gasoline volume,

and a much smaller percentage in the

areas of greatest environmental need. As

described in more detail below, and in

Chapter VIII of the RIA, we concluded

that refineries owned by small

businesses face unique hardship

circumstances, compared to larger

companies.

The primary reason for this

consideration is that small businesses

lack the resources available to large

companies which enable the large

companies (including those large

companies that own small volume

refineries) to raise capital for investing

in desulfurization equipment. The small

businesses are also likely to have

insufficient time to secure loans,

compete for engineering resources, and

complete construction of the needed

desulfurization equipment in time to

meet the standards adopted today which

begin in 2004.

The emissions benefits of low sulfur

gasoline are needed as soon as possible,

for two primary reasons: (1) To reduce

ozone and other harmful air pollutants,

and (2) to enable vehicle emissions

control technology for Tier 2 vehicles.

Since our analysis showed that small

businesses in particular face hardship

circumstances, we are adopting

temporary, interim standards that will

provide refineries owned by small

businesses additional time to meet the

ultimate 30 ppm refinery average and 80

ppm per gallon cap standards. This

approach allows us to achieve the

needed emission reductions in the

2004–2007 time frame because hardship

circumstances are expected to be faced

by only a small portion of the refining

industry.

We believe that these temporary,

interim standards are an effective way to

phase in the low sulfur standards as

expeditiously as is feasible thereby

achieving significant air quality benefits

in an expeditious manner. This section

describes the special provisions we are

offering small businesses to mitigate the

impacts of our program on them and

generally explains the process we

undertook to analyze those impacts.

Please refer to the RTC document for a

detailed discussion of comments

received on these provisions, and to the

RIA for a more detailed discussion of

our analysis of small refiner

circumstances.

As explained in the regulatory

flexibility analysis in Section VIII.B. of

this document and in Chapter 8 of the

RIA, we considered the impacts of our

proposed regulations on small

businesses. We have historically, as a

matter of practice, considered the

potential impacts of our regulations on

small businesses, as discussed in more

detail in Section IV.C.2.a.ii., below. The

analysis of small business impacts

conducted for this rulemaking was

performed in conjunction with a Small

Business Advocacy Review (SBAR)

Panel we convened, pursuant to the

Regulatory Flexibility Act as amended

by the Small Business Regulatory

Enforcement Fairness Act of 1996

(SBREFA). We believe that the

temporary, interim standards we are

adopting for small refiners contributed

to our development of a framework to

achieve significant environmental

benefits from lower sulfur gasoline in

the most expeditious manner that is

reasonably practicable. In the SBREFA

amendments, Congress stated that

‘‘uniform Federal regulatory * * *

requirements have in numerous

instances imposed unnecessary and

disproportionately burdensome

demands including legal, accounting,

and consulting costs upon small

businesses * * * with limited

resources[,]’’ and directed agencies to

consider the impacts of certain actions

on small entities. The final report of the

Panel is available in the docket.

Through the SBREFA process, the Panel

provided information and

recommendations regarding:

• The significant economic impact of

the proposed rule on small entities;

• Any significant alternatives to the

proposed rule which would ensure that

the objectives of the proposal were

accomplished while minimizing the

economic impact of the proposed rule

on small entities;

• The projected reporting,

recordkeeping, and other compliance

requirements of the proposed rule; and,

• Other relevant federal rules that

may duplicate, overlap, or conflict with

the proposed rule.

In addition to our participation in the

SBREFA process, we conducted our

own outreach, fact-finding, and analysis

of the potential impacts of our

regulations on small businesses. Many

of the small refiners with whom we and

the Panel met indicated their belief that

their businesses may close due to the

substantial costs, capital and other, of

meeting the 30/80 standard without

additional time. Based on these

discussions and our data analysis, the

Panel and we agree that small refiners

would likely experience a significant

and disproportionate economic

hardship in reaching the objectives of

our gasoline sulfur reduction program.

However, the Panel also noted that the

undue burden imposed upon the small

refiners by our sulfur requirements

could be alleviated with additional time

for compliance. We agree with the Panel

on both of these points.

For today’s action, we have structured

a temporary, interim compliance

flexibility for qualifying small refiners,

both domestic and foreign, based on the

factors described below. Specifically,

we structured this provision to address

small refiner hardship while achieving

air quality benefits expeditiously and

ensuring that the reductions needed in

gasoline sulfur coincide with the

introduction of Tier 2 vehicles.

First, the compliance deadlines in the

program, combined with flexibility for

small refiners, will achieve the air

quality benefits of the program quickly,

while ensuring that small refiners will

have adequate time to raise capital for

infrastructure changes. Many, if not

most, small refiners have limited, if any,

additional sources of income beyond

their refinery for financing the

equipment necessary to produce low

sulfur gasoline. Because these small

refiners typically do not have the

financial backing that larger and

generally more integrated companies

have, they need additional time to

secure capital financing from their

lenders.

Second, we believe that allowing time

for sulfur-reduction technologies to be

proven-out by larger refiners before

small refiners have to put them in place

would reduce the risks incurred by

small refiners who utilize these

technologies to meet the standards. The

added time would likely allow for costs

of these desulfurization units to

decrease, thereby limiting the economic

consequences for small refiners. Small

refiners are disadvantaged by the

economies of scale that exist for the

larger refining companies—capital costs

and per-barrel fixed operating costs are

generally higher for them.

Finally, providing small refiners more

time to comply would ensure that

adequate engineering and construction

resources would be available. Since

most large and small refiners will need

to install additional processing

equipment to meet the sulfur

requirements, there will be a

tremendous amount of competition for

technology services, engineering

manpower, and construction

management and labor. Our analysis

Federal Register / Vol. 65, No. 28 / Thursday, February 10, 2000 / Rules and Regulations 6767

shows that there are limitations to the

elasticity of these resources. In addition,

vendors will be more likely to contract

their services with the major companies

first, as their projects will offer larger

profits for the vendors.

Providing this flexibility to allow

small refiners to deal with hardship

circumstances enables us to go forward

with the phase-in of the 30 ppm sulfur

standard beginning in 2004. Without

this flexibility, it is possible that the

benefits of the 30 ppm standard would

not be achieved as quickly. By

providing temporary relief to those

refiners that need additional time, we

are able to adopt a program that reduces

gasoline sulfur levels expeditiously and

in a way that is feasible for the industry

as a whole.

In addition, we believe the volume of

gasoline that will be eligible for the

interim standards is small. We estimate

that small refiners produce

approximately four percent of all

gasoline used in the U.S., excluding

California. In most cases, gasoline

produced by refiners is mixed with

substantial amounts of other gasoline

prior to retail distribution (due to the

nature of the gasoline distribution

system). This mixing generally results in

only marginal increases in overall sulfur

levels. Thus, the sulfur level of gasoline

actually used by Tier 2 vehicles should

generally be much lower than that

produced by individual small refineries

under this provision.

i. How Are Small Refiners Defined?

How We Defined ‘‘Small’’ Refiner in the

Proposal

In identifying the small refiners most

susceptible to the economic challenge of

meeting the low-sulfur requirements, we

closely examined the Small Business

Administration’s (SBA) definition of

small refiner for the purposes of

regulation. In that assessment we

concluded that the SBA definition

provided a reasonable metric for

identifying small refiners that would be

significantly impacted by the sulfur

program requirements. By adopting the

SBA definition we could expeditiously

provide certainty of small refiner status

to refiners who applied for the

temporary compliance flexibility.

Specifically, we proposed a definition

where any petroleum refining company

having no more than 1,500 employees

throughout the corporation as of January

1, 1999 could apply for the temporary

compliance flexibilities. This proposed

employee limit included any

subsidiaries, regardless of the number of

individual gasoline-producing refineries

owned by the company or the number

of employees at any given refinery.

While we proposed a definition based

on corporate employment, in light of the

SBA definition and the SBAR Panel’s

recommendations, we also sought

comment on alternative definitions of a

small refiner. Such alternatives

included definitions based on volume of

crude oil processed (at a given refinery

and/or corporate-wide) or volume of

gasoline produced, with the

understanding that any relief offered to

refiners must not substantially reduce

the program’s environmental benefits.

Our Revised Small Refiner Definition

Based on comments received on the

proposal, we are making two changes to

our definition of a small refiner: we are

(1) revising the employee number

criterion; and, (2) adopting a cap on the

corporate crude oil capacity for a

refining company to qualify as a small

business under today’s regulations.

In regard to the employee number

criterion, we are modifying how the

employee number is determined, based

on comments received from SBA. As

mentioned above, our proposed

definition applied to any petroleum

refining company having no more than

1,500 employees throughout the

corporation as of January 1, 1999. We

selected that date to prevent companies

from ‘‘gaming’’ the system. However, as

SBA pointed out in its comments, the

Small Business Act regulations specify

that, where the number of employees is

used as a size standard, as we proposed

for small refiners, size determination is

based on the average number of

employees for all pay periods during the

preceding 12 months.

Since we intended to use SBA’s size

standard in our proposal, we are

incorporating that definition correctly in

today’s action. It is also worth

mentioning that SBA shares our

concerns about preventing companies

from gaming the system and that it

solved this problem specifically by

using the average employment over 12

months. In effect, this approach helps to

prevent companies from applying for

and receiving small refiner status in bad

faith. An example of an inappropriate

application for small refiner status

would be a refiner that temporarily

reduced its workforce from 1600

employees to 1495 employees

immediately before January 1, 1999 and

then immediately rehired those

employees after that cutoff date.

Furthermore, the averaging concept was

designed to properly address firms with

seasonal fluctuations, according to SBA.

Second, we’re amending the small

refiner definition to include a corporate

crude oil capacity cap. We believe such

a corporate volume limitation is

necessary to ensure that only truly small

businesses benefit from the relaxed

interim standards. Refineries that

process large amounts of crude are

likely to be better able to install

desulfurization equipment to meet the

national standards in 2004. In addition

to ensuring that the interim standards

target the appropriate group of refiners

that need additional time, the volume

limit also serves to ensure that the

volume of gasoline subject to such

standards is not significant. In addition,

we received many comments that we

should adopt a threshold based on

crude capacity as specified in the Clean

Air Act and used in past EPA fuel

programs.

In the lead phase-down program for

gasoline, we used a definition of ‘‘small

refinery’’ that Congress adopted in 1977

specifically for the lead phase-down

program. The definition was based on

crude oil or feedstock capacity at a

particular refinery (less than or equal to

50,000 barrels per calendar day (bpcd)),

combined with total crude oil or feed

stock capacity of the refiner that owned

the refinery (less than or equal to

137,500 bpcd). In 1990, the lead phasedown program was complete and

Congress removed this provision from

the Act.

Shortly before the Act was amended

in 1990, we set standards for sulfur

content in diesel fuel, including a twoyear delay for small refineries. We used

the same definition of small refinery as

we used in the lead phase-down

program. This two-year delay, like many

of the small business flexibilities in our

gasoline sulfur proposal, was aimed at

problems that small refineries faced in

raising capital and in arranging for

refinery construction.

In the 1990 amendments to the Clean

Air Act, Congress rejected this small

refinery provision, and instead allocated

allowances to small diesel refineries

under the Title IV Acid Rain program.

(See CAA Section 410(h).) This

approach was also aimed at helping

small refineries solve the problem of

raising the capital needed to make

investments to reduce diesel sulfur.

Congress provided allowances to small

refineries that met criteria similar to that

used in the lead phase-down

provision—based on the crude oil

throughput at a particular refinery,

combined with the total crude oil

throughput of the refiner that owned the

refinery.

As mentioned above, the CAA

definition was based on crude oil or

feedstock capacity at a particular

refinery, combined with total crude oil

6768 Federal Register / Vol. 65, No. 28 / Thursday, February 10, 2000 / Rules and Regulations

92Company means the business structure of the

refinery whether privately or publicly owned.

or feed stock capacity of the refiner that

owned the refinery (less than or equal

to 137,500 bpcd). However, given the

mergers, acquisitions, and other changes

that have transpired throughout the

refining industry in the past few years,

we believe the appropriate boundary

today is a corresponding corporate

crude capacity less than or equal to

155,000 bpcd.

Therefore, in consideration of the

above, a refiner must meet both of the

following criteria to qualify for the

special small refiner provisions

described in the next section:

• No more than 1500 employees

corporate-wide, based on the average

number of employees for all pay periods

from January 1, 1998 to January 1, 1999;

and

• A corporate crude capacity less

than or equal to 155,000 bpcd for 1998.

ii. Standards That Small Refiners Must

Meet

Upon careful review of the comments

received on the proposal as well as the

recommendations of the SBAR Panel,

we have determined that regulatory

relief in the form of delayed compliance

dates is appropriate to allow small

refiners, both foreign and domestic, to

comply with our regulations without

disproportionate burdens. From 2004 to

2007, when U.S. refiners must meet the

30/80 standard or the standards listed in

Table IV.C–1 if they are participating in

our ABT program, refiners meeting the

corporate employee and capacity limits

prescribed above are allowed to comply

with somewhat less stringent

requirements. These interim annualaverage standards for qualifying small

refiners are shown in Table IV.C–3

below.

TABLE IV.C–3.—TEMPORARY GASOLINE SULFUR REQUIREMENTS FOR SMALL REFINERS IN 2004–2007

Refinery baseline sulfur level (ppm)

Temporary Sulfur Standards (ppm)

Average Cap

0 to 30 ................................................................ 30 ppm ............................................................. 300 ppm.

31 to 200 ............................................................ Baseline Level .................................................. 300 ppm.

201 to 400 .......................................................... 200 ppm ........................................................... 300 ppm.

401 to 600 .......................................................... 50% of baseline ............................................... Factor of 1.5 times the average standard.

601 and above ................................................... 300 ................................................................... 450.

The cap standards for the first two

‘‘bins’’ of refineries (that is those with

baseline sulfur levels from zero to 30

and 31 to 200) have been relaxed

somewhat from the proposal based on

comments that the proposed standards

for these two bins were more stringent

than the options under discussion for all

other refiners. We believe that these

small refiners should be able to meet the

average standards without much, if any,

change to their operations but the more

lenient cap will give them some

flexibility for turnarounds or

unexpected equipment ‘‘upsets’’.

Compliance with the standards in

Table IV.C–3 is based on a refiner’s

demonstration that it meets our specific

small refiner criteria. Refiners who

qualify as a small refiner under our

definition must establish a sulfur

baseline for each of their participating

refineries. The following sections

explain these requirements in more

detail to supplement the information

presented above. We also explain how

small refiners can apply for an

extension of up to two additional years

of the applicable small refiner

standards, based on a variety of factors

such as technology availability or

financial hardship.

iii. How Do Small Refiners Apply for

Small Refiner Status?

Refiners seeking small refiner status

under our gasoline sulfur program must

apply to us in writing no later than

December 31, 2000, requesting this

status. This application for small refiner

status must contain the information

described below.

Companies 92 seeking small refiner

status must provide us with the

following information:

Employment Information

• A listing of the name and address

of each location where any employee of

the company worked during the 12

months preceding January 1, 1999.

• The average number of employees

at each location based upon the number

of employees for each of the company’s

pay periods for the 12 months preceding

January 1, 1999.

• The type of business activities

carried out at each location.

Crude Capacity Information

• The total corporate crude oil

capacity of the refiner as reported to the

Energy Information Administration

(EIA) of the U.S. Department of Energy

(DOE).

For refineries owned by joint

ventures, the total employment of both

(all) companies must be considered in

determining whether the 1,500

employee limit is met. In addition, a

refiner who reactivates a refinery that

was shut down or non-operational

between January 1, 1998 and January 1,

1999, may apply for small refiner status

no later than June 1, 2002. In this case,

we will consider the information

provided to determine the correct

period for judging compliance with the

1500 threshold. Where appropriate we

will look at the most recent 12 months

of employment information.

Refiners seeking small refiner status

must also provide us with the total

crude capacity of their corporation (the

sum of all individual refinery capacities

for multiple-refinery companies,

including any and all subsidiaries) as

reported to EIA for 1998 (published by

EIA in 1999). The information

submitted to EIA is presumed to be

correct. However, in cases where a

company disputes this information, we

will allow 60 days after the company

submits its application for small refiner

status for that company to petition the

Agency with the appropriate data to

correct the record. For reactivated

refineries owned by a small refiner, we

will consider the information provided

to determine the correct period for

judging compliance with the corporate

capacity threshold. Where appropriate,

we will look at the most recent year of

crude capacity information.

If a refiner with approved small

refiner status later exceeds the 1,500

employee threshold without merger or

acquisition or the corporate capacity of

155,000 bpcd, its refineries could keep

their individual refinery standards. This

is to avoid stifling normal company

growth and is subject to our finding that

the company did not apply for and

receive the small refiner status in bad

faith.

Federal Register / Vol. 65, No. 28 / Thursday, February 10, 2000 / Rules and Regulations 6769

93 Includes batch number, volume, and sulfur

content for each batch of gasoline produced in 1997

and 1998.

94 In addition to gasoline produced from crude

oil, a small refinery’s baseline volume would

include gasoline produced from purchased

blendstocks where the blendstocks are substantially

transformed using a refinery processing unit.

iv. How Do Small Refineries Apply for

a Sulfur Baseline?

A qualifying small refiner, domestic

or foreign, may apply for an individual

sulfur baseline by December 31, 2000

for any refinery owned by the company

by providing the following information:

• A calculation of the refinery’s sulfur

baseline using its average gasoline

sulfur level based on 1997 and 1998

production data, 93 and

• The average volume of gasoline

(including conventional and

reformulated) produced in these two

years.

As we proposed, baseline sulfur levels

and gasoline volumes are averaged over

two years (1997 and 1998) to account for

any production-related anomalies that

may have occurred in 1997 or 1998. For

the overall program, however, we are

only using 1997 and 1998 data for the

reasons described in Section IV.C.1,

above. For any refiner who reactivates a

refinery that was shut down or nonoperational between January 1, 1998

and January 1, 1999, we will use the

most recent information available for

baseline establishment purposes.

The regulations specify the

information to be submitted to support

the baseline application. The baseline

calculations should include any oxygen

added to the gasoline at the refinery.

This application would be submitted at

the same time the refiner applies for

small business status; confirmation of

small business status would not be

required to apply for an individual

sulfur baseline. Pending refinery

baseline approval, we will assign

standards to each of the company’s

refineries in accordance with Table

IV.C.–3.

Oxygenate blenders, regardless of

their size, are not eligible for the small

refiner individual baselines and

standards because they would not

experience circumstances similar to

those of small refining companies. That

is, oxygenate blenders do not have the

burden of capital costs to install

desulfurization equipment, which is the

primary reason for allowing small

refiners to have a relaxed compliance

schedule.

v. Volume Limitation on Use of a Small

Refinery Standard

Except as noted below, the volume of

gasoline subject to a small refinery’s

individual standards is limited to the

average volume of gasoline the refinery

produced from crude oil during the

baseline years (1997 and 1998),

excluding the volume of gasoline

produced using blendstocks produced at

another refinery and exports.94 Under

this approach, the baseline volume for

a small refinery would reflect only the

volume of gasoline produced from crude

oil during the 1997 and 1998 baseline

years.

However, to ensure that the overall

sulfur in gasoline from small refiners

does not greatly increase under the

terms of the small refiner extension and

result in overall gasoline pool sulfur

levels higher than anticipated, the

volume would be limited beginning in

2004 to the volume of gasoline that is

the lesser of: (1) 105 percent of the

baseline volume, or (2) the volume of

gasoline produced during the year from

crude oil. Any volume of gasoline

produced during an averaging period in

excess of this limitation is subject to the

corporate average standards that apply

to all other refiners (i.e., the corporate

average standards listed in Table IV.C.–

1).

In 2006 and 2007, the refinery

averages of Table IV.C.–1 will apply. In

this case, the small refinery’s annual

average standard will be adjusted based

on the excess volume in a manner

similar to the compliance baseline

equation for conventional gasoline

under Section 80.101(f) of Part 40 of the

Code of Federal Regulations. However,

the small refinery’s per-gallon cap

standard will not be adjusted.

This limitation assures that small

refineries receive relief only for gasoline

produced from crude oil, that is the

portion of the refinery operation

requiring capital investment to meet

lower sulfur standards.

vi. Extensions Beyond 2007 for Small

Refiners

Beginning January 1, 2008, all small

companies’ refineries must meet the

national sulfur standard of 30 ppm on

average and the 80 ppm cap, except

small refineries under IV.C.2.i. that

apply for and receive an extension of

their small refiner status and unique

standards. An extension will provide a

given small refinery up to an additional

two years to comply with the national

standards. An extension must be

requested in writing and must specify

the factors that demonstrate a significant

economic hardship to qualify the

refinery for such an extension. Factors

considered for an extension could

include, but are not limited to, the

refinery’s financial position; its efforts

to procure necessary equipment and to

obtain design and engineering services

and construction contractors; the

availability of desulfurization

equipment, and any other relevant

factors.

In order for us to consider an

extension, a refiner must submit a

detailed request for an extension by

January 1, 2007, demonstrating that it

has made best efforts to obtain necessary

financing, and must provide detailed

information regarding any lack of

success in obtaining financing. This

information shall include, but may not

be limited to copies of loan applications

for the necessary financing for the

construction of appropriate sulfur

reduction technology as well as the

application of financing for other

equipment procurements or

improvements in this time frame. If

financing has been disapproved or is

otherwise unsuccessful, the refiner shall

provide documents supporting the basis

for that disapproval and evidence of

efforts to pursue other means of

financing. If we determine that the

refiner has made the best efforts

possible to achieve compliance with the

national standards by January 1, 2008,

but has been unsuccessful for reasons

beyond its control, we will consider

granting the hardship extension initially

for the 2008 averaging period. If further

relief is appropriate for good reasons,

we will consider a further extension

through the 2009 averaging period but

in no case will this relief be provided

unless the refiner can demonstrate

conclusively that it has financing in

place and that it will be able to

complete construction and meet the

national gasoline sulfur standards no

later than December 31, 2009.

Compliance Plans for Demonstrating a

Commitment To Produce Low Sulfur

Gasoline

This final rule includes a compliance

plan provision for those refiners who

may seek a hardship extension of their

approved interim standards. This

provision requires that those refiners

with approved interim standards who

seek a hardship extension must submit

a series of reports to EPA discussing and

describing their progress toward

producing gasoline that meets the 30/80

ppm standards by January 1, 2008. We

expect that small refiners will need to

begin preparations to meet the national

standards in 2008 by 2004. However, we

understand that the potential exists for

some small refiners to face additional

hardship circumstances that will

warrant more time to meet the

standards. For this reason, we have

adopted provisions (see above) allowing

6770 Federal Register / Vol. 65, No. 28 / Thursday, February 10, 2000 / Rules and Regulations

95 If a refinery has a baseline sulfur level higher

than 120 ppm (as described below in IV.C.1.c.v.),

then credits are generated from the baseline to 120

ppm and allotments from 120 ppm to the new

sulfur level (and discounted 20 percent if

applicable).

refiners subject to the interim standards

to petition us and make a showing that

additional time is needed to meet the

national standards. To properly evaluate

these hardship applications, we are

requiring demonstrations of good faith

efforts towards assessing the economic

feasibility, along with the business and

technical practicality of ultimately

producing low sulfur gasoline. Such

progress reports must be submitted for

a refiner to receive consideration in any

future determinations regarding

hardship extensions. However, these

reports are not required from refiners

who will not be seeking a hardship

extension.

By June 1, 2004, such refiners would

need to submit preliminary information

in the form of a report outlining its time

line for compliance and a project plan

discussing areas such as permits,

engineering plans (e.g., design and

construction), and capital commitments

for making the necessary modifications

to produce low sulfur gasoline.

Documents showing activities and

progress in these areas should be

provided if available.

By no later than June 1, 2005, these

small refiners would need to submit a

report to us stating in detail progress to

date based on their time line and project

plan. This should include copies of

approved permits for construction of the

equipment, contracts for design and

construction, and any available

evidence of having secured the

necessary financing to complete the

required construction. If any difficulties

in meeting this requirement are

anticipated, the refiner must submit a

detailed report of all efforts to date and

the factors that may cause delay,

including costs, specification of

engineering or other design work still

needed and reasons for delay,

specification of equipment needed and

any reasons for delay, potential

equipment suppliers and history of

negotiations, and any other relevant

information. If unavailability of

equipment is a factor, the report must

include a discussion of other options

considered, and the reasons these other

options are not feasible.

In addition, the small refiner would

need to provide evidence by June 1,

2006, that on-site construction has

begun at its refinery(s) and that absent

unforeseen circumstances or problems,

they will be producing complying

gasoline (30/80 ppm) by January 1,

2008. While the submission of these

progress reports is evidence of a

refiner’s good faith efforts to comply by

2008, it does not bind the refiner to

make gasoline in 2008. There are several

reasons why a refiner may choose to exit

the gasoline-production business in

2008 that go beyond the low sulfur

gasoline requirement.

As a result of a refiner’s efforts in

moving toward compliance with the

2008 standards, for market, economic,

business, or technical reasons, the

company could choose not to make

gasoline in 2008. Although we do not

believe this will be the likely outcome

for small refiners, we cannot preclude it.

Any refiner that makes such a

determination in its progress reports

will have until 2008 to transition out of

gasoline production, but will not be

considered for a extension of hardship

relief.

vii. Can Small Refiners Participate in

the ABT Program?

As described in IV.C.1.c.i above, any

refinery (including those owned by

small refiners) can generate sulfur

allotments (in ppm-gallons) in 2003 by

producing gasoline containing less than

60 ppm sulfur on an annual-average

basis. Once this 60 ppm trigger is

reached, allotments will be calculated

based on the amount of reduction from

120 ppm 95. However, these allotments

may be discounted depending on the

actual sulfur level. If a refinery fully

demonstrates compliance by producing

gasoline with an annual average sulfur

level of 0 to 30 ppm, the allotments

retain their full value—they are not

discounted at all. For actual sulfur

levels of 31–60 ppm, which are

indicative of a partial demonstration,

the allotments are discounted 20

percent.

During the period 2000–2003,

refineries owned by small refiners can

also generate credits by producing

gasoline averaging at least 10 percent

lower than that refinery’s baseline sulfur

level. In other words, to generate

credits, the refinery’s annual average

sulfur level for all of its gasoline on

average must be 0.9 × (baseline sulfur

level). Once this ‘‘trigger’’ is reached,

credits will be calculated based on the

amount of reduction from the refinery’s

sulfur baseline. For example, if in 2002

a refinery reduced its annual average

sulfur level from a baseline of 450 ppm

to 150 ppm (well below the trigger of 0.9

× 450 = 405 ppm), its sulfur credits

would be determined based on the

difference in annual sulfur level (450—

150 = 300 ppm) multiplied by the

volume of gasoline produced in 2002.

Similarly, small foreign refiner-owned

refineries with an individual sulfur

baseline can generate credits in these

years as long as the annual average

sulfur level of the gasoline exported to

the U.S. from that refinery is lower than

90 percent of the baseline sulfur level.

During the period 2004–2007,

refineries owned by small refiners will

be permitted to generate credits but only

if their actual annual sulfur level of all

gasoline produced or imported averages

below their refinery standard, and only

for the difference between the standard

and the actual annual sulfur average.

A refinery (owned by a small refiner)

wishing to participate in the ABT

program can sell credits beginning as

soon as January 1, 2000 but may wait

until December 31, 2000 to apply for

small refiner status. However, the

standards assigned to that refinery (as

presented in Table IV.C–3 above) will be

based on the sulfur level from which

credits were generated, not the baseline

sulfur level, since the refiner would

have already demonstrated the ability to

meet the lower sulfur level. For

compliance purposes and to give

refineries certainty regarding the

gasoline sulfur standards to which they

will be held during 2004–2007, the

standards for a small refiner refinery

participating in ABT will be set based

on the refinery’s lowest sulfur average

for any year between 1999 and 2003.

Using the example above, a refinery

(owned by a refiner with small refiner

status) with a 1997–98 baseline sulfur

level of 450 ppm would have an interim

average standard of 450/2 = 225 ppm

and a cap of 225 × 1.5 = 338 ppm. If that

refinery generated 300 sulfur credits in

2002 by producing gasoline with 150

ppm sulfur, then that refinery’s average

sulfur standard for 2004–2007 would be

ratcheted down to 150 ppm with a cap

of 300 ppm. However, that refinery

would still be able to use the 300 credits

that it had generated and banked in

2002 for compliance with its 150 ppm

standard.

Based on the comments received on

our proposal, we are allowing small

refineries to use credits and/or

allotments that they generated and/or to

purchase credits and/or allotments from

another refinery to meet their average

standard during 2004–2007. We

solicited comment on whether small

refiners subject to the interim standards

should be permitted to use credits

towards meeting those standards, and

several small refiners who already

produce very clean gasoline commented

that the special small refiner standards

do not benefit them in any way. These

refiners argued that if they could

generate sufficient sulfur credits in

2000–2003, or could obtain such credits

Federal Register / Vol. 65, No. 28 / Thursday, February 10, 2000 / Rules and Regulations 6771

through purchases from other refiners,

they would not participate in the small

refiner program but would instead

participate in the sulfur ABT program.

But since they are not positioned to

generate credits (due to their already

low sulfur levels), and have little

certainty of being able to purchase

credits, they need the relief provided by

the small refiner provisions. We concur

with these concerns and thus permit

small refiners to use ABT credits and

allotments. Small refiners may only use

ABT credits and/or allotments to

comply with their refinery average

standard, not the per-gallon caps

applied to their gasoline.

At any time, a small refiner can

choose to ‘‘opt out’’ of the small refiner

program and, beginning the next

calendar year, comply with the

standards in Table IV.C–2. The refiner

would have to notify us of this change

in its compliance program. Once a small

refiner leaves the small refiner program,

however, it would not be eligible to reenter the small refiner program.

b. Temporary Waivers From Low Sulfur

Requirements in Extreme Unforeseen

Circumstances

In the final rule, EPA is adopting a

provision permitting refiners to seek a

temporary waiver from the sulfur

standards in certain circumstances.

Such waivers will be granted at EPA’s

discretion. Under this provision a

refiner may seek permission to

distribute gasoline that does not meet

the applicable low sulfur standards for

a brief time period, based on the

refiner’s inability to produce complying

gasoline because of extreme and

unusual circumstances outside the

refiner’s control that could not have

been avoided through the exercise of

due diligence. This provision is similar

to a provision in EPA’s RFG regulations,

and is intended to provide refiners

short-term relief in unanticipated

circumstances such as an accidental

refinery fire or a natural disaster. The

short-term waiver provision is intended

to address unanticipated circumstances

that cannot be reasonably foreseen at

this time or in the near future

The conditions for obtaining such a

waiver that are similar to those in the

RFG regulations. These conditions are

necessary and appropriate to ensure that

any waivers that are granted are limited

in scope, and that refiners do not gain

economic benefits from a waiver.

Therefore, refiners seeking a waiver

must show that the waiver is in the

public interest, that the refiner was not

able to avoid the nonconformity, that it

will make up the air quality detriment

associated with the waiver, as well as

any economic benefit from the waiver,

and that it will meet the applicable

sulfur standards as expeditiously as

possible.

c. Temporary Waivers Based on Extreme

Hardship Circumstances

In addition to the provision for shortterm relief in unanticipated

circumstances, we are adopting a

provision for relief based on extreme

hardship circumstances. In developing

our sulfur program, we considered

whether any refiners would face

particular difficulty in complying with

the standards in the lead time provided.

As described in Section IV.C.2.a., we

concluded that refineries owned by

small businesses would experience

more difficulty in complying with the

standards on time because, as a group,

they have less ability to raise capital

necessary for refinery investments, face

proportionately higher costs because of

economies of scale, and are less able to

successfully compete for limited

engineering and construction resources.

However, it is possible that other

refiners who do not meet our criteria for

the interim standards also face

particular difficulty in complying with

the sulfur standards on time. Therefore,

we are including in the final rule a

provision allowing us, at our discretion,

to grant temporary waivers from the

sulfur standards based on a showing of

extreme hardship circumstances. We do

not anticipate, nor do we expect there

is a need for, granting temporary

waivers that apply to more than

approximately one percent of the

national gasoline pool in any given year.

This provision would allow refiners

(domestic and foreign) to request a

waiver from the sulfur standards based

on a showing of unusual circumstances

that result in extreme hardship and

significantly affect the ability to comply

by the applicable date. As with the

small refiner interim standards, this

provision furthers our overall

environmental goals of achieving low

sulfur gasoline nationwide as soon as

possible. By providing short-term relief

to those refiners that need additional

time because they face hardship

circumstances, we can adopt a program

that reduces gasoline sulfur beginning

in 2004 for the majority of the industry

that can comply by then.

As described above, EPA understands

that this program will require significant

economic investments by the refining

industry. We have adopted a program

with sufficient flexibilities (including an

ABT program, allotment trading, a

geographic phase-in, and interim

standards for qualifying small refiners)

to make these investments reasonable

and feasible over the time frame in

which the standards are phased in.

Because the refining industry

encompasses a wide variety of

individual circumstances, and our

program phases in based on the lead

time we believe is reasonable for the

industry as a whole, there may be

unusual circumstances that impose

extreme hardship and significantly

affect an individual refinery’s ability to

comply in the lead time provided.

However, we do not intend for this

waiver provision to encourage refiners

to delay planning and investments they

would otherwise make in anticipation of

receiving relief from the applicable

requirements. In addition, we want to

limit the environmental impact of any

hardship waivers from compliance with

the standards. Thus, we anticipate that

hardship waivers will only be granted in

rare circumstances.

Because of the significant

environmental benefits of lowering

sulfur in gasoline, we will administer

this provision in a manner consistent

with continuing to ensure the

environmental objectives of the

regulation. In our analysis of the interim

small refiner standards, we concluded

that only a minimal portion of the

national gasoline pool would potentially

be impacted by the less stringent

interim standards, due to the relatively

small production volume of these

facilities. To limit the potential

environmental impact of this hardship

provision, we reserve the discretion to

deny applications where we find that

granting a waiver would result in an

unacceptable environmental impact.

While this determination will be made

on a case-by-case basis, we do not

expect there is a need for, nor do we

anticipate, granting waivers that apply

to more than approximately one percent

of the total national pool of gasoline in

any given year, or to more than a

minimal percentage of the gasoline

supply of an area known to have

significant air quality problems.

There are several factors we will

consider in evaluating a petition for

additional time to comply. This could

include refinery configuration, severe

economic limitations, and other factors

that prevent compliance in the lead time

provided. Applications for a waiver

must include information that will

allow us to evaluate all appropriate

factors. EPA will consider whether the

refinery configuration or operation is

unique or atypical, how much of a

refinery’s gasoline is produced using an

FCC unit, its hydrotreating capacity

relative to its total crude capacity, total

reformer unit throughput capacity

relative to total production, gasoline

6772 Federal Register / Vol. 65, No. 28 / Thursday, February 10, 2000 / Rules and Regulations

production in proportion to other

refinery products, and other relevant

factors. A refiner may also face severe

economic limitations that result in a

demonstrated inability to raise capital to

make necessary investments to comply

in time, which can be shown by an

unfavorable bond rating, inadequate

resources of the refiner and its parent

and/or subsidiaries, or other relevant

factors. In addition, we will look at the

total crude capacity of the refinery and

its parent corporation. Finally, we will

consider where the gasoline will be sold

in evaluating the environmental impacts

of granting a waiver.

This provision is intended to address

unusual circumstances that we expect

will be foreseeable now or in the

immediate future, such as unique and

atypical gasoline refinery operations or

a demonstrated inability to raise capital.

These kinds of circumstances should be

apparent at this time or in the near

future, so refiners seeking additional

time under this provision must apply

for relief by September 1, 2000. A

refiner seeking a waiver must show that

unusual circumstances exist that impose

extreme hardship and significantly

affect its ability to meet the standards on

time, and that it has made best efforts

to comply with the standards, including

efforts to obtain credits and/or

allotments towards compliance.

Applicants for a hardship waiver must

also submit a plan demonstrating how

the standards will be achieved as

expeditiously as possible. In submitting

the plan, it must include a timetable for

obtaining the necessary capital,

contracting for engineering and

construction resources, and obtaining

permits. EPA will review and act on

applications, and, if a waiver is granted,

will specify a time period, not to extend

beyond January 1, 2008 (the date by

which all gasoline is expected to meet

the 30 ppm refinery average and 80 ppm

per gallon cap standards), for the

waiver.

If a waiver is granted, EPA will

impose as a condition of the waiver

other reasonable requirements,

including antibacksliding requirements

to ensure no deterioration in the sulfur

level of gasoline and interim sulfur

standards that the refiner must meet.

This is appropriate since some refiners

who may qualify for a waiver can

achieve some sulfur reductions, and

even reductions to levels above 30 ppm

will result in some environmental

benefits. While this provision allows

EPA to waive the per gallon standards

as well as the average standards, EPA

would not allow gasoline sulfur to

exceed the highest per gallon cap

applicable to a refiner under the interim

small refiner standards described in

Section IV.C.2. Once all applications

have been received, EPA will consider

the appropriate process to follow in

reviewing and acting on applications,

including whether to conduct a notice

and comment decision-making process.

3. Streamlining of Refinery Air

Pollution Permitting Process

a. Brief Summary of Proposal

Industry commenters expressed

concern over the ability to obtain

permits to construct and operate the

facility modifications needed to meet

the Tier 2 rule requirements by the end

of 2004. As part of the preamble to the

proposed rule, we outlined possible

approaches to provide greater certainty

and to expedite potentially applicable

permit processes. In general, we

solicited comments on whether and

how policy options might be designed

so as to exempt Tier 2 projects from

major New Source Review (NSR) and/or

to expedite the processing of permits

where such requirements would apply.

In particular, we solicited comment on

whether the major NSR process could be

expedited if: (1) EPA provided guidance

on Lowest Achievable Emission Rate

(LAER) requirements or Best Available

Control Technology (BACT)

determinations; (2) emissions

reductions could be made available or

designated for offsetting Tier 2

activities; (3) EPA developed model

permits, or (4) EPA assisted the States

in resolving source-specific permitting

issues as they would arise. The Agency

also solicited comments on how the title

V operating permit requirements, where

applicable, might need to be integrated

with the relevant NSR process.

In proposing various mechanisms to

expedite the permitting of Tier 2

projects, we recognized that a

combination of measures might be

needed, since the situations could vary

widely among individual refineries due

to differences in such factors as

available equipment capacity, amount of

sulfur in the crude oil, and applicable

State regulations. Source-specific

analyses are also necessary to establish

what sulfur reduction techniques can be

applied, to determine the applicable

permitting requirements, and to

evaluate what controls will be necessary

as a result of these requirements. We

indicated our intent to offer assistance

where needed.

b. Significant Comments Received

The most significant comments

received on the proposal concerning the

timing impacts due to air permit

requirements are presented below.

These commenters focused exclusively

on the requirements to obtain a

preconstruction permit under the NSR

program. Generally, commenters only

concerns regarding the title V operating

permit program were that the States’

ongoing efforts to issue these permits

might create a backlog which could

delay the issuance of NSR permits for

Tier 2 projects. A more detailed

discussion of comments received on the

proposal and EPA’s response are

contained in the Response To

Comments document and is filed in the

Docket for this action.

We received written and oral

comments from refineries about the

permit requirements associated with

Tier 2 projects. Refiners emphasized the

need for certainty. They pointed out the

need to secure preconstruction permits

within 18 months (e.g., 6 months to

prepare and file NSR applications and

another 12 months to issue the permit)

and the need for permitting authorities

to commit appropriate resources to meet

this time frame. State and local air

pollution control agencies did not

support providing exemptions from

emissions control and permitting

requirements. Rather, agency

commenters stated that they could

accomplish the permitting requirements

in the necessary time frames, provided

that complete permit applications were

received in a timely manner and refiners

conferred with their regulatory agencies

soon after the Tier 2 requirements are

promulgated. They also indicated that

the major NSR process could be

expedited and have more certainty (i.e.,

permits could be processed in 6 to 9

months) if EPA would provide guidance

on emissions controls, emissions

monitoring, and offsets. In general,

environmental and community groups

pointed out that the remedies under

traditional permitting practices should

be exhausted before additional

flexibility is granted for Tier 2 projects.

c. Today’s Action

Based on the comments and other

information received in response to the

proposal, EPA believes that it is not

necessary or appropriate to explore

further the development of possible

options which would exempt Tier 2

projects from the normally applicable

preconstruction review process. This

position is supported by: (1) The

comments of States that industry can, in

general, apply and receive NSR permits

in time to comply with Tier 2; and (2)

the recognition of industry’s potential

ability to use emissions reductions to

net Tier 2 projects out of major NSR

which would otherwise be applicable.

Nonetheless, we believe that actions

Federal Register / Vol. 65, No. 28 / Thursday, February 10, 2000 / Rules and Regulations 6773

should be taken to facilitate early

compliance, to add certainty to the

anticipated permitting actions and

schedules, and to minimize the

possibility of delay. Accordingly, EPA is

taking two types of actions to promote

these objectives.

First, as previously discussed, we

have structured the final gasoline sulfur

program to allow additional lead time

for many refiners (i.e., certain refineries

would be able to make desulfurization

changes later than the proposed 2004

compliance date to meet Tier 2

requirements). This approach will help

address the concerns over the

availability of necessary new equipment

and permitting backlogs caused by

many refineries acting to obtain permits

and order equipment within relatively

the same time period.

Second, we intend to take several

actions (described in more detail below)

to expedite and impart greater certainty

in obtaining necessary major NSR

permits. As a result of comments

received on the proposal, and the lead

time provided in the final gasoline

sulfur program, we believe that the vast

majority of permits can be issued within

the necessary time frames, provided that

refineries submit their preconstruction

applications in a timely manner and

regulatory authorities prioritize the

issuance of these permits. We also

intend to assist States and refiners on a

case-by-case basis in their efforts to

address any unique permitting problems

that might arise and, thus, remedy

potential problems that could cause

unanticipated delays. In the unlikely

event permitting delays occur, EPA will

work with refiners and the state/local

permitting agencies on a case-by-case

basis, where a refinery has unique

circumstances that necessitate unique

treatment.

While today’s strategy will help

expedite the permitting process,

refineries that trigger major NSR as a

result of producing low sulfur gasoline

will still have to install the stringent

level of emissions control technology

required by the Act. However, we

intend to issue guidance to assist states

in making decisions about the levels of

control technology, as described more

below. In addition, the Agency wishes

to clarify that, in our efforts to provide

greater certainty and to facilitate more

expeditious permitting, we are in no

way shortcutting existing opportunities

for public participation. We recognize

the importance of public participation

in making permitting decisions and

intend that the measures adopted to

address permitting concerns will not

diminish the opportunities for public

participation.

i. Major New Source Review

The major NSR program, as it applies

to existing major stationary sources of

air pollution, requires that a

preconstruction permit be issued before

a source makes a physical change or

change in its method of operation of any

project that would result in a significant

net emissions increase. As described in

the proposal, the steps taken by certain

refineries to implement gasoline sulfur

reductions to meet today’s rule could

result in emissions increases in one or

more pollutants which may trigger the

requirements for this type of

preconstruction permit. A number of the

refineries are located in areas designated

as nonattainment for at least one

pollutant. The nonattainment NSR

requirements pursuant to part D of the

Act would apply to any such refinery

undergoing a major modification. For

those refineries located in attainment or

unclassifiable areas, permit

requirements for the prevention of

significant deterioration (PSD) of air

quality must be met for major

modifications.

The EPA recognizes the importance of

timely major NSR (as applicable) permit

actions for refineries to proceed with

necessary changes to meet the new low

sulfur gasoline standard. We encourage

refineries to begin discussions with

permitting authorities and to submit

permit applications—as early as

possible. In addition, based on

comments received, we believe that

there are a few key areas in which

assistance would be useful toward

helping States issue timely permits to

the applicable refineries:

• Federal guidance on emissions

control technology requirements.

Refineries subject to major NSR

review will be required to undergo a

source-specific evaluation to apply

either BACT or LAER, depending upon

the applicable program requirements.

For example, the evaluation for BACT is

case-by-case and takes into account the

alternative technologies available to

control pollution from a particular

emissions unit or process, and considers

the energy, environmental, economic

and other costs associated with each

technology. We intend to issue guidance

setting out a level of emissions that, in

our view, would be expected to satisfy

the requirements for BACT for certain

emissions units associated with refinery

desulfurization projects. While States

would not be required to use the results

to establish BACT for a particular

refinery subject to review and EPA’s

guidance on a control technology may

not be appropriate where there exists

unusual site-specific circumstances,

such guidance would add the certainty

of EPA’s expectations.

Since negotiation of an appropriate

BACT level often is one of the most time

consuming aspects of permitting, we

believe this EPA guidance will

significantly expedite the process. The

federal guidance on BACT, by including

an evaluation of the most stringent

control levels currently being achieved

or required, will also provide federal

guidance on LAER. The EPA plans to

make a draft of this guidance available

for public review and comment in

January 2000. Final guidance would

then be prepared, after relevant

comments are considered, in time for

States, refiners, and the public to

consider in preparing and reviewing

permit applications and proposed

permits.

• Availability of offsets.

Refineries located in nonattainment

areas must offset any proposed

significant emissions increases with an

equal or greater amount of emissions

reductions from other sources, usually

coming from within the same

nonattainment area. We believe that

vehicle emissions reductions resulting

from the use of low sulfur gasoline can

be used as offsets for the refineries, as

long as the statutory and regulatory

criteria for creditable offsets are satisfied

and States decide to provide for this

opportunity in their SIP attainment

demonstration. We believe generally

that this option should be available to

States since only a small fraction of the

total vehicle emissions reductions in

any county would be needed to offset

refinery emissions increases resulting

from implementation of gasoline

desulfurization projects. Generally, the

reductions must also occur in the same

nonattainment area as the location of

the refinery for which the offsets are

required. The EPA plans to issue the

appropriate guidance early in the year

2000 to help a State to determine

whether and to what extent it may wish

to use vehicle emissions reductions as

offsets for Tier 2 projects.

• EPA refinery permitting teams.

We intend to assemble special EPA

teams, comprised of Headquarters and

Regional Office experts, that will track

the overall progress in permit issuance

and will be available to assist State and

local permitting authorities, refineries,

and the public upon request to resolve

site-specific permitting issues. These

teams will be comprised of persons who

are knowledgeable about permitting

programs and refinery operations and

can provide expert assistance to

troubleshoot permitting issues that may

arise. As appropriate, the teams will

work with stakeholders on a case-byVerDate 27<JAN>2000 21:29 Feb 09, 2000 Jkt 190000 PO 00000 Frm 00077 Fmt 4701 Sfmt 4700 E:\FR\FM\10FER2.SGM pfrm08 PsN: 10FER2
6774 Federal Register / Vol. 65, No. 28 / Thursday, February 10, 2000 / Rules and Regulations

96The NEJAC was chartered in 1993 expressly to

give the EPA Administrator independent advice,

consultation, and recommendations on

environmental justice matters. NEJAC members

come from state, tribal, and local governments;

tribal and indigenous citizen’s organizations;

business and industry; academia; and

environmental advocacy and grassroots community

groups.

case basis to evaluate site-specific

approaches to regulatory compliance

within existing policy and regulations.

ii. Environmental Justice

The Tier 2/gasoline sulfur rule will

help achieve significant nationwide

reductions in the emissions of nitrogen

oxides (NOx), volatile organic

compounds (VOC), particulate matter

(PM), and sulfur dioxide (SO2). These

reductions will improve air quality

across the country and will provide

increased protection to the public

against a wide range of health effects,

including chronic bronchitis,

respiratory illnesses, and aggravation of

asthma symptoms. Furthermore, the

Tier 2/gasoline sulfur rule will achieve

environmental benefits in the local areas

where refineries are located, due to

reductions in tail pipe emissions from

vehicles driven in those areas. Although

we expect residual emissions increases

at some refineries even after installing

the stringent level of emissions controls

required under the Act, for the vast

majority of areas, we believe that these

potential refinery emissions increases

will be very small compared to the Tier

2 benefits in those same local areas.

We believe it is important to

understand and address concerns

relating to potential localized emissions

increases from refineries that make

significant process changes to meet the

requirements of the Tier 2 rule. We

believe that, among other things, the

keys to addressing any potential

concerns are as follows:

• Providing meaningful community

involvement early and throughout the

process;

• Determining what information and

actions would eliminate concerns; and

• Determining what EPA, States, and

industry can do to make the permitting

process smoother by ensuring ongoing

community involvement in the decision

making process and by building trust

among stakeholders.

To this end, the Agency has already

taken some actions to try to mitigate

potential environmental justice

concerns. First, EPA’s Office of Air and

Radiation and the Alternative Dispute

Resolution Team within EPA’s Office of

the Administrator implemented a

national convening process which was

designed to bring together a broad

spectrum of stakeholders to explore

with them their perceptions and views

of issues associated with Tier 2

permitting and to assess the potential

for a collaborative process to address

specific implementation issues at some

time in the future. The convening was

carried out by an outside neutral party

who conducted interviews with

representatives from selected EPA

offices, States, industry, environmental

groups, and environmental justice

organizations. Second, EPA held

informational briefings and provided

background materials to the National

Environmental Justice Advisory

Council’s (NEJAC) 96 Air and Water

Subcommittee and Enforcement

Subcommittee to provide an

opportunity for them to provide

feedback and recommendations to the

Agency. Finally, in October 1999, we

met with both national environmental

groups and environmental justice

advocacy representatives, to discuss

their views on the permitting aspects of

the proposed rule.

The EPA is committed to continue

working with all stakeholders to resolve

specific Environmental Justice issues if

and when they arise. To fulfill this

commitment, we plan to undertake

additional actions in the future,

including providing education and

outreach about the rule and its impacts

in local communities, developing

permitting guidance through a public

process and addressing Title VI

petitions if they arise.

D. What Are the Economic Impacts, Cost

Effectiveness and Monetized Benefits of

the Tier 2 Program?

Consideration of the economic

impacts of new standards for vehicles

and fuels has been an important part of

our decision making process for this

final rule. The following sections

describe first the costs associated with

meeting the new vehicle standards and

the new fuel standards. This will be

followed with a discussion of the cost

effectiveness of the rule. Lastly, we will

discuss the results of a benefit-cost

assessment that we have prepared.

Full details of our cost analyses,

including information not presented

here, can be found in the RIA associated

with this rule. Also, our response to

comments on the cost, cost

effectiveness, and monetized benefits

analyses are contained in the Response

to Comments document for this rule.

1. What Are the Estimated Costs of the

Vehicle Standards?

To perform a cost analysis for the

standards, we first determined a

package of likely technologies that

manufacturers could use to meet the

standards and then determined the costs

of those technologies. In making our

estimates we have relied on our own

technology assessment which included

publicly available information, such as

that developed by California, as well as

confidential information supplied by

individual manufacturers, and the

results of our own in-house testing.

In general, we expect that the Tier 2

standards will be met through

refinements of current emissions control

components and systems rather than

through the widespread use of new

technology. Furthermore, smaller

lighter-weight vehicles and trucks will

generally require less extensive

improvements than larger vehicles and

trucks. More specifically, we anticipate

a combination of technology upgrades

such as the following:

• Improvements to the catalyst

system design, structure, and

formulation plus in some cases an

increase in average catalyst size and

loading;

• Air and fuel system modifications

including changes such as improved

microprocessors, improved oxygen

sensors, leak free exhaust systems, air

assisted fuel injection, and calibration

changes including improved precision

fuel control and individual cylinder fuel

control;

• Engine modifications, possibly

including an additional spark plug per

cylinder, an additional swirl control

valve, or other hardware changes

needed to achieve cold combustion

stability;

• Increased use of fully electronic

exhaust gas recirculation (EGR); and

• Increased use of secondary air

injection for 6 cylinder and larger

engines.

The costs for MDPVs have been

included here with the LDT4 cost

estimates. We expect that the

technologies needed to meet the Tier 2

standards for the MDPVs will be very

similar to those for LDT4s. However, the

MDPVs cost estimates are somewhat

higher than for LDT4s. Vehicles over

8,500 pounds GVWR are currently

certified to heavy-duty engine emissions

standards using the heavy-duty test

procedures. This, at least in part, has led

to differences in baseline technologies

compared to current LDT4s. Vehicles

above 8,500 pounds, for example, are

currently equipped with technologies

such as close coupled catalysts and

secondary air injection to a lesser

extent. Therefore, we expect higher

incremental costs for the MDPVs

compared to LDT4s. There is further

information on the costs for MDPVs in

the RIA.

Federal Register / Vol. 65, No. 28 / Thursday, February 10, 2000 / Rules and Regulations 6775

97 ‘‘Learning Curves in Manufacturing,’’ Linda

Argote and Dennis Epple, Science, February 23,

1990, Vol. 247, pp. 920–924.

98Even though the NLEV program ends in the

Tier 2 timeframe, we have not included the NLEV

program costs or benefits in our analysis, since EPA

analyzed and adopted NLEV previously.

Using a typical mix of changes for

each group, we projected costs

separately for LDVs, the different LDT

classes, and for different engine sizes (4,

6, 8, 10-cylinder) within each class. For

each group we developed estimates of

both variable costs (for hardware and

assembly time) and fixed costs (for R&D,

retooling, and certification).

Cost estimates based on the current

projected costs for our estimated

technology packages represent an

expected incremental cost of vehicles in

the near-term. For the longer term, we

have identified factors that would cause

cost impacts to decrease over time. First,

since fixed costs are assumed to be

recovered over a five-year period, these

costs disappear from the analysis after

the fifth model year of production.

Second, the analysis incorporates the

expectation that manufacturers and

suppliers will apply ongoing research

and manufacturing innovation to

making emission controls more effective

and less costly over time. Research in

the costs of manufacturing has

consistently shown that as

manufacturers gain experience in

production and use, they are able to

apply innovations to simplify

machining and assembly operations, use

lower cost materials, and reduce the

number or complexity of component

parts.97 These reductions in production

costs are typically associated with every

doubling of production volume. Our

analysis incorporates the effects of this

‘‘learning curve’’ by projecting that the

variable costs of producing the Tier 2

vehicles decreases by 20 percent starting

with the third year of production. We

applied the learning curve reduction

only once since, with existing

technologies, there would be less

opportunity for lowering production

costs than would be the case with the

adoption of new technology.

We have prepared our cost estimates

for meeting the Tier 2 standards using

a baseline of NLEV technologies for

LDVs, LDT1s, and LDT2s, and Tier 1, or

current technologies for LDT3s, LDT4s

and MDPVs. These are the standards

that vehicles would be meeting in

2003.98 We have not specifically

analyzed smaller incremental changes to

technologies that might occur due to the

interim standards between the baseline

and Tier 2. In most cases, we believe

these changes will not be significant

based on current certification levels and

manufacturers will maximize carryover. For others, manufacturers can use

averaging and other program flexibilities

to avoid redesigning vehicles twice

within a relatively short period of time.

We believe this is likely to be an

attractive approach for manufacturers

due to the savings in R&D and other

resources.

For the total annual cost estimates, we

projected that manufacturers will start

the phase-in of Tier 2 vehicles with

LDVs in 2004 and progress to heavier

vehicles until all LDT2s meet Tier 2

standards in 2007. For LDT3s and

LDT4s, we projected some sales of Tier

2 LDT3s prior to 2008 for purposes of

averaging in the interim program and

that the phase-in of Tier 2 vehicles

would end with LDT4s and MDPVs in

2009.

Finally, we have incorporated what

we believe to be a conservatively high

level of R&D spending at $5,000,000 per

vehicle line (with annual sales of

100,000 units per line). We have

included this large R&D effort because

calibration and system optimization is

likely to be a critical part of the effort

to meet Tier 2 standards. However, we

believe that the R&D costs may be

generous because the projection ignores

the carryover of knowledge from the

first vehicle lines designed to meet the

standard to others phased-in later.

The evaporative emissions standards

we are finalizing today for LDVs, LDTs

and MDPVs are feasible with relatively

small cost impacts. We estimate the cost

of system improvements to be about $4

per vehicle, for all vehicle classes. This

incremental cost reflects the cost of

moving to low permeability materials,

improved designs or low-loss

connectors. R&D for the evaporative

emissions standard is included in the

R&D estimates given above for the

tailpipe standards. We have included no

projections of learning curve reductions

for the evaporative standard.

Table IV.D.–1 provides our estimates

of the per vehicle increase in purchase

price for LDVs, LDTs, and MDPVs. The

near-term cost estimates in Table IV.D.–

1 are for the first years that vehicles

meeting the standards are sold, prior to

cost reductions due to lower

productions costs and the retirement of

fixed costs. The long-term projections

take these cost reductions into account.

We have sales weighted the cost

differences for the various engine sizes

(4-, 6-, 8-, 10-cylinder) within each

category.

TABLE IV.D.–1.—ESTIMATED PURCHASE PRICE INCREASES DUE TO TIER 2 TAILPIPE STANDARDS

LDV LDT1 LDT2 LDT3 LDT4/

MDPVs a

Tailpipe standards:

Near-term (year 1) ............................................................................ $78 $70 $125 $245 $258

Long-term (year 6 and beyond) ........................................................ 49 45 97 199 208

Evaporative Standard .............................................................................. 4 4 4 4 4

Notes:

aWeighted average.

We did not receive comments

disagreeing with the technology

projections or technology cost estimates

contained in the proposal. We have,

however, revised our cost estimates

somewhat based on new information

available since the proposal. We

moderately lowered our cost estimates

due to adjustments we have made in our

technology projections. Based on the

results of our vehicle testing program

described above in section IV.A.1., we

now believe that a few of the hardware

changes we had anticipated are not

likely to be needed to meet the

standards. Albeit there is always

fluctuation, the spot prices of precious

metals have increased somewhat since

the proposal and we have adjusted our

analysis to reflect those changes.

Overall, the cost estimates are within

5 percent of those in the proposal for

LDVs and LLDTs. The changes noted

above moderately lowered the costs for

HLDTs compared to the proposal. The

cost increase due to the inclusion of

MDPVs offsets most of the lowered costs

6776 Federal Register / Vol. 65, No. 28 / Thursday, February 10, 2000 / Rules and Regulations

for the LDT4 category. The resulting

cost estimate for the LDT4/MDPVs

tailpipe standards is also within 5

percent of the cost estimates for LDT4s

contained in the proposal. The detailed

technology and cost analyses are

available in the RIA.

We are also finalizing OBD II

requirements and onboard vapor

recovery (ORVR) requirements for

MDPVs. We have estimated that OBD II

will cost about $80, which includes the

costs of additional sensors and system

improvements. We have estimated

ORVR system costs to be about $10. The

$10 cost for ORVR does not include any

fuel cost savings over the life of the

vehicles due the recover of fuel vapor

during refueling. ORVR provides a fuel

cost savings because the vapors are

captured, and burned in the engine,

rather than escaping to the atmosphere.

We estimate the savings over the life of

the vehicle to be about $6. These costs

are not reflected in Table IV.D.–1.

2. Estimated Costs of the Gasoline

Sulfur Standards

As we explained at the beginning of

Section IV.C, we expect that most

refiners will have to install capital

equipment to meet the gasoline sulfur

standard. Presuming that refiners will

want to minimize the cost involved, the

majority of refiners are expected to

desulfurize the gasoline blendstock

produced by the fluidized catalytic

cracker (FCC) unit, although a few may

choose to desulfurize the feed to the

FCC unit. Recent advances have led to

significant improvements in the

hydrotreating technologies used for FCC

gasoline desulfurization. Since these

improved technologies represent the

lowest cost options and are expected to

be used by most refiners needing to

install desulfurization equipment, we

have based our cost estimates primarily

on their use. However, in

acknowledgment that some refiners,

particularly those which make

investment decisions in the near term,

are likely to select more traditional

approaches using proven technologies,

we have included the costs for currently

proven desulfurization technologies in

our analysis, as well. This is different

from the analysis we did in support of

our proposal, where we assumed that all

refiners would take advantage of the

most improved technologies we were

aware of at that time.

For our analysis of the costs of

controlling gasoline sulfur, we

estimated the costs in five different

regions of the country (Petroleum

Administration Districts for Defense, or

PADDs) for reductions from the current

PADD average gasoline sulfur level

down to a 30 ppm average. We then

combined the regional costs to develop

an average national individual refinery

cost, and used this figure to calculate

national aggregate capital and operating

costs. In our proposal we estimated a

single cost for desulfurizing gasoline,

using as an assumption for the purpose

of analysis that all refiners would

upgrade their refineries by 2004 and

that all would choose one of two

improved technologies we knew of at

the time. We then reduced this cost over

time to reflect expected cost reductions

due to further technology advancements

and reduced operating costs due to

improved understanding of the

technologies and refinery

debottlenecking. Based on improved

information about the availability of

technologies, we have now analyzed the

costs of controlling sulfur on a year-byyear basis beginning with 2004, to be

consistent with our analysis of the rate

at which the industry would invest in

desulfurization technologies over the

first years of the program and the

changing technology selections (and

costs) that would accompany this phasein (discussed in Section IV.C.1 above).

A detailed description of our

calculations can be found in the

Regulatory Impact Analysis; the reader

can refer to the draft RIA released with

the proposed rule for more information

on our prior analysis.

We estimate that, on average,

refineries which install equipment to

meet the 30 ppm average standard will

invest about $44 million for capital

equipment and spend about $16 million

per year for each refinery to cover the

operating costs associated with these

desulfurization units. Since this average

represents many refineries diverse in

size and gasoline sulfur level as well as

a mix of desulfurization technologies,

some refineries will pay more and

others less than the average costs. When

the average per-refinery cost is

aggregated for all the gasoline expected

to be produced in this country in 2008

(the first year that all refiners will be

required to meet the 30 ppm standard,

unless any small refiners are granted a

extension of hardship relief), the total

investment for desulfurization

processing units (spread between 2003

and 2007) is estimated to be about $4.3

billion, and operating costs for these

units is expected to be about $1.3 billion

per year.

Using our estimated capital and

operating costs for domestic refineries,

we calculated the average per-gallon

cost of reducing gasoline sulfur down to

30 ppm for each year as the program is

implemented. Using a capital cost

amortization factor (based on a seven

percent rate of return on investment)

and including no taxes, we estimated

the average national cost for

desulfurizing gasoline to be about 1.7–

1.9 cents per gallon as the program is

phased in. This cost is the cost to

society of reducing gasoline sulfur down

to 30 ppm that we used for estimating

cost effectiveness. Table IV.D.–2 below

summarizes our estimates of per-gallon

gasoline cost increases for select years.

TABLE IV.D.–2.—ESTIMATED PERGALLON COST FOR DESULFURIZING

GASOLINE IN FUTURE YEARS

Year Cost (cents/

gallon)

2004 .......................................... 1.9

2005 .......................................... 1.9

2006 .......................................... 1.7

2007 .......................................... 1.7

2008–2018 ................................ 1.7

2019+ ........................................ 1.3

Although the costs shown here are

slightly higher than we projected in the

proposal, overall, we believe our revised

costs are consistent with those in the

proposal and that our improved

methodology and information are the

source of the differences. As stated

earlier in this section, we believe this

analysis more accurately reflects the

actual investment decisions of

individual refiners over the years in

which the industry is phasing down

sulfur levels. Furthermore, we have also

made a number of other adjustments to

our analysis of capital and operating

costs for each individual technology

based on new information received from

the technology vendors and information

we obtained during the comment

period. For example, we now include

eight different technologies in our

analysis, including some more

traditional approaches, whereas in the

proposal we only considered two new

technologies. Hence, the range of costs

is broader. In addition, as explained in

the RIA, we now believe we

underestimated the capital costs of

desulfurization slightly in the proposal

based on our calculation of the costs of

providing hydrogen to the processes.

We believe our analysis now reflects the

most up-to-date information about the

costs of installing and operating the

various desulfurization technologies

included in our analysis. These

adjustments are explained in detail in

the Regulatory Impact Analysis.

We still believe that over time,

particularly in 2006–8 when the last

refineries will be making investments,

the costs of gasoline desulfurization

equipment will be significantly lower

Federal Register / Vol. 65, No. 28 / Thursday, February 10, 2000 / Rules and Regulations 6777

99For a sensitivity analysis of our cost estimates

using alternative assumptions, please see Chapter V

of the RIA.

100Figure IV.D.–1 is based on the amortized costs

from Tables IV.D.–1 and IV.D.–2. Actual capital

investments, particularly important for fuels, would

occur prior to and during the initial years of the

program, as described above in section IV.D.2.

than it is today. Some of the

technologies expected to be selected in

this time frame (specifically, the new

adsorption technologies which we

didn’t know about when we proposed

these requirements) are projected to cost

about half of what the older

technologies cost. Furthermore, with

time refiners will have to replace

existing desulfurization equipment (as

equipment ages), and by then they will

have a number of low cost alternatives

to choose from. Thus, as Table IV.D.–2

shows, the long term estimated costs for

gasoline desulfurization are lower than

those we projected in our proposal.99

3. What Are the Aggregate Costs of the

Tier 2/Gasoline Sulfur Final Rule?

Using current data for the size and

characteristics of the vehicle fleet and

making projections for the future, the

per-vehicle and per-gallon fuel costs

described above can be used to estimate

the total cost to the nation for the

emission standards in any year. Figure

IV.D.–1 portrays the results of these

projections.100

BILLING CODE 6560–50–P

BILLING CODE 6560–50–C

As can be seen from the figure, the

annual cost starts out at about $1.9

billion per year and increases over the

phase-in period to about $4.1 billion in

2008. Total annualized costs are

projected to remain at about $4 billion

through 2018. After 2018, annualized

fuel costs are projected to decrease

somewhat due to the use of new

technologies which would enable

refiners to produce low sulfur fuel at a

lower cost. The gradual rise in costs

long term is due to the effects of

projected growth in vehicle sales and

fuel consumption. The RIA provides

further detail regarding these cost

projections.

4. How Does the Cost-effectiveness of

This Program Compare to Other

Programs?

This section summarizes the costeffectiveness analysis conducted by EPA

and its results. The purpose of this

analysis is to show that the reductions

from the vehicle and fuel controls being

finalized today are cost-effective in

comparison to alternative means of

attaining or maintaining the NAAQS.

This analysis involves a comparison of

our program not only to past measures,

but also to other potential future

measures that might be employed to

attain and maintain the NAAQS. Both

EPA and states have already adopted

numerous control measures, and

remaining measures tend to be more

expensive than those previously

employed. As we employ the most costeffective available measures first, more

expensive ones tend to become

necessary over time.

The emission reductions used to

calculate the cost-effectiveness levels

reported here are based on those

reductions used for our air quality

analysis modeling and benefits analysis.

This was done to maintain consistency

in the analyses. As noted in Section

III.B. above, we have updated our

inventory model since the air quality

modeling inventories were calculated.

In Chapter III of our RIA, Table III.A.–

3 compares the updated Tier 2 model

with the air quality analysis modeling

and shows that the emission reductions

expected from Tier 2/gasoline sulfur

will be substantially greater than the

amounts originally calculated. If the

6778 Federal Register / Vol. 65, No. 28 / Thursday, February 10, 2000 / Rules and Regulations

updated numbers were incorporated

into our cost-effectiveness we would

expect the results to be improved over

those shown in this section.

We received a number of comments

on our cost-effectiveness analysis in

response to our NPRM. Our responses to

these comments can be found in the

Response To Comments document.

a. Cost-Effectiveness of This Program

We have calculated the costeffectiveness of the exhaust emission/

gasoline sulfur standards and the

evaporative emission standards, based

on two different approaches. The first

considers the net present value of all

costs incurred and emission reductions

generated over the life of an average Tier

2 vehicle. This per-vehicle approach

focuses on the cost-effectiveness of the

program from the point of view of the

Tier 2 vehicles which will be used to

meet the new requirements, and is the

method used in our proposal. However,

the per-vehicle approach does not

capture all of the costs or emission

reductions from the Tier 2/gasoline

sulfur program since it does not account

for the use of low sulfur gasoline in preTier 2 vehicles. Therefore, we have also

calculated an aggregate costeffectiveness using the net present value

of costs and emission reductions for all

in-use vehicles over a 30-year time

frame.

As described earlier in the discussion

of the cost of this program, the cost of

complying with the new standards will

decline over time as manufacturing

costs are reduced and amortized capital

investments are recovered. To show the

effect of declining cost in the pervehicle cost-effectiveness analysis, we

have developed both near term and long

term cost-effectiveness values. More

specifically, these correspond to

vehicles sold in years one and six of the

vehicle and fuel programs. Vehicle cost

is constant from year six onward. Fuel

costs per gallon continue to decline

slowly in the years past year six;

however, the overall impact of this

decline is small and we have decided to

use year six results for our long term

cost-effectiveness. Chapter VI of the RIA

contains a full description of this

analysis, and you should look in that

document for more details of the results

summarized here.

The aggregate approach to calculating

the cost-effectiveness of our program

involves the net present value of all

nationwide emission reductions and

costs for a 30-year period beginning

with the start of the program in 2004.

This timeframe captures both the early

period of the program when very few

Tier 2 vehicles will be in the fleet, and

the later period when essentially all

vehicles in the fleet will meet Tier 2

standards. We have calculated the

aggregate cost-effectiveness using the

net present value of the nationwide

emission reductions and costs for each

calendar year. These emission

reductions and costs are summarized in

Sections III.B, III.C, and IV.D.3, and are

given for every calendar year in the RIA.

For more information on how the

aggregate cost-effectiveness was

calculated please refer to the RIA.

Our per-vehicle and aggregate costeffectiveness values are given in Tables

IV.D.–3 and IV.D.–4. Table IV.D.–3

summarizes the per-vehicle, net present

value lifetime costs, NMHC+NOX

emission reductions, and resulting costeffectiveness results for our Tier 2/

gasoline sulfur program using sales

weighted averages of the costs (both

near term and long term) and emission

reductions of the various vehicle classes

affected. Table IV.D.–4 provides the

same information from the program

aggregate perspective. It includes the net

present value of the 30-year stream of

vehicle and fuel costs, NMHC+NOX

emission reductions, and the resulting

aggregate cost-effectiveness. For

simplicity, we have used the midpoint

of our estimated range of 20 to 65

percent for the irreversibility effect. The

full range of irreversibility would only

cause the cost-effectiveness values to

differ from those in Table IV.D–3, for

example, by $60/ton to $100/ton. Note

that, even though we are setting new

standards for PM, those standards are

already being met, so there is no cost

associated with the new PM standard

and therefore no separate costeffectiveness analysis for PM.

Tables IV.D.–3 and IV.D.–4 also

display cost-effectiveness values based

on two approaches to account for the

reductions in SO2 and tailpipe emitted

sulfate particulate matter (PM)

associated with the reduction in

gasoline sulfur. While these reductions

are not central to the program and are

therefore not displayed with their own

cost-effectiveness, they do represent real

emission reductions due to our program.

The first set of cost-effectiveness

numbers in the tables simply ignores

these reductions and bases the costeffectiveness on only the NMHC+NOX

reductions from Tier 2/gasoline sulfur.

The second set accounts for these

ancillary reductions by crediting some

of the cost of the program to SO2 and

PM reduction. The amount of cost

allocated to SO2 and PM is based on the

cost-effectiveness of SO2 and PM

emission reductions that could be

obtained from alternative, potential

future EPA programs.

TABLE IV.D–3.—PER-VEHICLE COST-EFFECTIVENESS OF THE STANDARDS

Cost basis

Discounted

lifetime vehicle & fuel

costs

Discounted

lifetime

NMHC +

NOX reduction (tons)

Discounted

lifetime

cost-effectiveness per

ton

Discounted

lifetime

cost-effectiveness per

ton with

SO2 and direct PM

credit a

Near term cost (production year 1) ................................................................................. $243 0.110 $2,211 $1,717

Long term cost (production year 6) ................................................................................. 205 0.110 1,863 1,368

Notes:

a $51 credited to SO2 ($4,800/ton), $4 to direct PM ($10,000/ton).

Federal Register / Vol. 65, No. 28 / Thursday, February 10, 2000 / Rules and Regulations 6779

101This rulemaking was remanded by the D.C.

Circuit Court on May 14, 1999. However, the

analyses completed in support of that rulemaking

are still relevant, since they were designed to

investigate the cost-effectiveness of a wide variety

of potential future emission control strategies.

102 ‘‘Regulatory Impact Analyses for the

Particulate Matter and Ozone National Ambient Air

Quality Standards and Proposed Regional Haze

Rule,’’ Appendix B, ‘‘Summary of control measures

in the PM, regional haze, and ozone partial

attainment analyses,’’ Innovative Strategies and

Economics Group, Office of Air Quality Planning

and Standards, U.S. Environmental Protection

Agency, Research Triangle Park, NC, July 17, 1997.

TABLE IV.D–4.—AGGREGATE COST-EFFECTIVENESS OF THE STANDARDS

Discounted aggregate vehicle &

fuel costs

Discounted aggregate NMHC +

NOX reduction (tons)

(millions)

Discounted aggregate cost-effectiveness per ton

Discounted aggregate cost-effectiveness per ton with SO2 and direct PM credit a

$48.1 billion 23.5 $2,047 $1,311

Notes:

a $13.8 billion credited to SO2 ($4,800/ton), $3.5 billion to direct PM ($10,000/ton).

b. How Does the Cost-Effectiveness of

This Program Compare With Other

Means of Obtaining Mobile Source NOX

+ NMHC Reductions?

In comparison with other mobile

source control programs, we believe that

our program represents the most costeffective new mobile source control

strategy currently available that is

capable of generating substantial NOX +

NMHC reductions. This can be seen by

comparing the cost-effectiveness of

today’s program with a number of

mobile source standards that EPA has

adopted in recent years. Table IV.D.–5

summarizes the cost-effectiveness of

several recent EPA actions.

TABLE IV.D.–5.—COST-EFFECTIVENESS OF PREVIOUSLY IMPLEMENTED

MOBILE SOURCE PROGRAMS

Program $/ton a

NOX+NMHC

2004 Highway HD Diesel

stds .................................... 204–399

Nonroad Diesel engine stds 410–650

Tier 1 vehicle controls .......... 1,980–2,690

NLEV .................................... 1,859

Marine SI engines ................ 1,128–1,778

On-board diagnostics ........... 2,228

Notes: a Costs adjusted to 1997 dollars.

We can see from the table that the

cost-effectiveness of the Tier 2/gasoline

sulfur standards falls within the range of

these other programs. Engine-based

standards (the 2004 highway heavy-duty

diesel standards, the nonroad diesel

engine standards and the marine sparkignited engine standards) have generally

been less costly than Tier 2/gasoline

sulfur. Vehicle standards, most similar

to today’s program, have values

comparable to or higher than Tier 2/

gasoline sulfur.

The values in Table IV.D.–5 might

imply that further reductions in NOX

and VOC from heavy-duty engines

could be more cost-effective than the

reductions that will be produced from

our Tier 2/gasoline sulfur program.

However, we do not believe that to be

the case. While we are indeed

developing a proposal for further

control from heavy-duty engines, we

expect that substantial further emission

reductions will require advanced aftertreatment devices. These devices will be

more costly than methods used to meet

our past standards, and will have

difficulty functioning properly without

changes to diesel fuel. We therefore

expect that the cost effectiveness of

future heavy-duty standards is not likely

to be significantly less than the cost

effectiveness of today’s rule.

On the light-duty vehicle side, the last

two sets of standards were Tier 1 and

NLEV, which had cost-effectiveness

comparable to or higher than Tier 2/

gasoline sulfur. Compared to engines,

these levels reflect the advanced (and

more expensive) state of vehicle control

technology, where standards have been

in effect for a much longer period than

for engines. Considering the increased

stringency of the Tier 2 standards, it is

noteworthy that the cost-effectiveness of

Tier 2/gasoline sulfur is in the same

range as these actions. Based on these

results, Tier 2/gasoline sulfur is a logical

and consistent next step in vehicle

control.

In conclusion, we believe that the Tier

2/Gasoline Sulfur program is a costeffective program for mobile source NOX

+ NMHC control. We are unable to

identify another mobile source control

program that would be more costeffective than Tier 2/gasoline sulfur

while also producing equivalent

reductions in NOX and NMHC

emissions in the same timeframe as our

program.

c. How Does the Cost-Effectiveness of

This Program Compare With Other

Known Non-Mobile Source

Technologies for Reducing NOX +

NMHC?

In evaluating the cost-effectiveness of

the Tier 2/Gasoline Sulfur program, we

also considered whether our program is

cost-effective in comparison with

alternative means of attaining or

maintaining the NAAQS other than

mobile source programs. As described

below, we have concluded that Tier 2/

Gasoline Sulfur is cost-effective

considering the anticipated cost of other

technologies that will be needed to help

attain and maintain the NAAQS.

In the context of the Agency’s

rulemaking to revise the ozone and PM

NAAQS, 101 the Agency compiled a list

of additional known technologies that

could be considered in devising new

emission reductions strategies.102

Through this broad review, over 50

technologies were identified that could

reduce NOX or VOC. The costeffectiveness of these technologies

averaged approximately $5,000/ton for

VOC and $13,000/ton for NOX. These

values clearly indicate that not only are

future emission control strategies likely

to be more expensive (less costeffective) than past strategies, but the

cost-effectiveness of our Tier 2/Gasoline

Sulfur program falls at the lower end of

the range for potential future strategies.

In addition, our Tier 2/Gasoline

Sulfur program will deliver critical

further reductions that are not readily

obtainable by any other means known to

the Agency. If all of the technologies

modeled in the NAAQS analysis costing

less than $10,000/ton were

implemented nationwide, they would

produce NOX emission reductions of

about 2.9 million tons per year. The Tier

2/Gasoline Sulfur program by itself will

generate about 2.8 million tons per year

once fully implemented. Given the

continuing need for further emission

reductions, we believe that Tier 2/

Gasoline Sulfur control is clearly a costeffective approach for attaining and

maintaining the NAAQS.

We recognize that the costeffectiveness calculated for Tier 2/

Gasoline Sulfur is not strictly

comparable to a figure for measures

targeted at nonattainment areas, since

Tier 2/Gasoline Sulfur is a nationwide

program. However, there are several

additional considerations that have led

us to conclude that Tier 2/Gasoline

Sulfur is cost-effective considering

6780 Federal Register / Vol. 65, No. 28 / Thursday, February 10, 2000 / Rules and Regulations

103Final Regulatory Impact Analysis: Control of

Emissions of Air Pollution from Highway HeavyDuty Engines, September 16, 1997.

104The ‘‘section 812 studies’’ refers to (1) US

EPA, Report to Congress: The Benefits and Costs of

the Clean Air Act, 1970 to 1990, October 1997 (also

known as the ‘‘section 812 Retrospective); and (2)

the first in the ongoing series of prospective studies

estimating the total costs and benefits of the Clean

Air Act (see EPA report number: EPA–410–R–99–

001, November 1999).

alternative means of attaining and

maintaining the NAAQS.

First of all is the fact that the cost

effectiveness of Tier 2/Gasoline Sulfur is

so much better than the numbers

developed for the NAAQS analysis. It is

only 20 percent as costly per ton as the

$10,000 per ton upper limit employed

in that analysis for selecting suitable

strategies even though, as noted above,

Tier 2/Gasoline Sulfur will produce

almost the same level of emission

reduction. Furthermore, as a national

program, Tier 2/Gasoline Sulfur can be

implemented as a single unified rule

without the need for individual action

by each of the states.

In dealing with the question of

comparing local and national programs,

it is also relevant to point out that,

because of air transport, the need for

NOX control is a broad regional issue

not confined to non-attainment areas

only. To reach attainment, future

controls will need to be applied over

widespread areas of the country. In the

analyses supporting the recent NOX

standards for highway diesel engines,103

we looked at this question in some

detail and concluded that the regions

expected to impact ozone levels in

ozone nonattainment areas accounted

for over 85% of total NOX emissions

from a national heavy-duty engine

control program. Similarly, NOX

emissions in attainment areas also

contribute to particulate matter

nonattainment problems in downwind

areas. Thus, the distinction between

local and national control programs for

NOX is less important than it might

appear.

Finally, the statute indicates that in

considering the cost-effectiveness of

Tier 2/Gasoline Sulfur EPA should

consider not only attainment, but also

maintenance of the standards. Tier 2/

Gasoline Sulfur—unlike nonattainment

area measures—will achieve attainment

area reductions that, among other

effects, will help to maintain air quality

that meets the NAAQS. These

reductions relate not only to the ozone

and PM NAAQS, but also to SO2 and

NO2, and to CO.

In summary, given the array of

controls that will have to be

implemented to make progress toward

attaining and maintaining the NAAQS,

we believe that the weight of the

evidence from alternative means of

providing substantial NOX + NMHC

emission reductions indicates that the

Tier 2/Gasoline Sulfur program is costeffective. This is true from the

perspective of other mobile source

control programs or from the

perspective of other stationary source

technologies that might be considered.

5. Does the Value of the Benefits

Outweigh the Cost of the Standards?

While relative cost-effectiveness is the

principal economic policy criterion

established for these standards in the

Clean Air Act (see CAA § 202(i)), further

insight regarding the merits of the

standards can be provided by benefitcost analysis. The purpose of this

section is to summarize the methods we

used and results we obtained in

conducting an analysis of the economic

benefits of the Tier 2 program, and to

compare these economic benefits with

the estimated costs of the rule. In

summary, the results of our analysis

using the EPAs preferred approach to

valuing premature mortality indicate

that the economic benefits of the Tier 2/

gasoline sulfur standards will likely

exceed the costs of meeting the

standards by about $20 billion (1997$).

a. What Is the Purpose of This BenefitCost Comparison?

Benefit-cost analysis (BCA) is a useful

tool for evaluating the economic merits

of proposed changes in environmental

programs and policies. In its traditional

application, BCA estimates the

economic ‘‘efficiency’’ of proposed

changes in public policy by organizing

the various expected consequences and

representing those changes in terms of

dollars. Expressing the effects of these

policy changes in dollar terms provides

a common basis for measuring and

comparing these various effects.

Because improvement in economic

efficiency is typically defined to mean

maximization of total wealth spread

among all members of society,

traditional BCA must be supplemented

with other analyses in order to gain a

full appreciation of the potential merits

of new policies and programs. These

other analyses may include such things

as examinations of legal and

institutional constraints and effects;

engineering analyses of technology

feasibility, performance and cost; or

assessment of the air quality need.

In addition to the narrow, economic

efficiency focus of most BCAs, the

technique is also limited in its ability to

project future economic consequences

of alternative policies in a definitive

way. Critical limitations on the

availability, validity, or reliability of

data; limitations in the scope and

capabilities of environmental and

economic effect models; and

controversies and uncertainties

surrounding key underlying scientific

and economic literature all contribute to

an inability to estimate the economic

effects of environmental policy changes

in exact and unambiguous terms. Under

these circumstances, we consider it

most appropriate to view BCA as a tool

to inform, but not dictate, regulatory

decisions such as the ones reflected in

today’s rule.

Despite the limitations inherent in

BCA of environmental programs, we

consider it useful to estimate the

potential benefits of today’s action both

in terms of physical changes in human

health and welfare and environmental

change, and in terms of the estimated

economic value of those physical

changes.

b. What Was Our Overall Approach to

the Benefit-Cost Analysis?

The basic question we sought to

answer in the BCA was: ‘‘What are the

net yearly economic benefits to society

of the reduction in mobile source

emissions likely to be achieved by the

final Tier 2 program?’’ In designing an

analysis to answer this question, we

selected a future year for analysis (2030)

that is representative of fullimplementation of the program (i.e.,

when the U.S. car and light truck

population is virtually only Tier 2

vehicles). We also adopted an analytical

structure and sequence similar to that

used in the ‘‘section 812 studies’’ 104 to

estimate the total benefits and costs of

the entire Clean Air Act. Moreover, we

used many of the same models, and

assumptions actually used in the section

812 studies, and other Regulatory

Impact Analyses (RIA’s) prepared by the

Office of Air and Radiation. By adopting

the major design elements, models, and

assumptions developed for the section

812 studies and other RIA’s, we have

largely relied on methods which have

already received extensive review by the

independent Science Advisory Board,

by the public, and by other federal

agencies.

c. What Are the Significant Limitations

of the Benefit-Cost Analysis?

Every BCA examining the potential

effects of a change in environmental

protection requirements is limited to

some extent by data gaps, limitations in

model capabilities (such as geographic

coverage), and uncertainties in the

underlying scientific and economic

Federal Register / Vol. 65, No. 28 / Thursday, February 10, 2000 / Rules and Regulations 6781

105Full documentation of the SAB

recommendations can be found at their website

(www.epa.gov/sab) under the following references:

EPA–SAB–COUNCIL–ADV–98–003, 1998; EPA–

SAB–COUNCIL–ADV–99–05, 1999; EPA–SAB–

COUNCIL–ADV–99–012, 1999; EPA–SAB–

COUNCIL–ADV–00–001, 1999; and EPA–SAB–

COUNCIL–ADV–00–002, 1999.

studies used to configure the benefit and

cost models. Deficiencies in the

scientific literature often result in the

inability to estimate changes in health

and environmental effects, such as

potential increases in premature

mortality associated with increased

exposure to carbon monoxide.

Deficiencies in the economics literature

often result in the inability to assign

economic values even to those health

and environmental outcomes which can

be quantified, such as changes in

visibility in residential areas. While

these general uncertainties in the

underlying scientific and economics

literatures are discussed in detail in the

RIA and its supporting documents and

references, the key uncertainties which

have a bearing on the results of the BCA

of today’s action are:

• The exclusion of potentially

significant benefit categories (e.g.,

health and ecological benefits of

incidentally controlled hazardous air

pollutants),

• Errors in measurement and

projection for variables such as

population growth,

• Variability in the estimated

relationships of health and welfare

effects to changes in pollutant

concentrations.

In addition to these uncertainties and

shortcomings which pervade all

analyses of criteria air pollutant control

programs, a number of limitations apply

specifically to the BCA of today’s action.

Though we used the best data and

models currently available, we were

required to adopt a number of

simplifying assumptions and to use data

sets which, while reasonably close, did

not match precisely the conditions and

effects expected to result from

implementation of the standards. For

example, to estimate the effects of the

program at full implementation we

projected vehicle miles traveled and

populations in the year 2030. These

assumptions may play a significant role

in determining the magnitude of the

benefits estimate. In addition, although

the emissions data sets used for this

analysis have been updated from those

used in the proposal, they may not

anticipate the emissions reductions

realized by other future actions and by

expected near-future control programs.

For example, it is possible that the Tier

2/gasoline sulfur standards will not be

the governing vehicle emissions

standards in 2030. In the years before

2030, the benefits from the Tier 2

program will be less than those

estimated here (significantly less in the

early years), because the Tier 2 fleet will

not be fully phased in.

Finally, the implementation period

for phasing-in the rule requirements is

a critical period that deserves careful

evaluation. The benefit-cost analysis for

2030 is not significantly affected by

alternative phase-in decisions, the

primary impact of which will occur in

the 2005–2015 time frame. As a result,

the analysis of phase-in alternatives

must rely on other types of analysis

(e.g., cost-effectiveness analysis).

The key limitations and uncertainties

unique to the BCA of the final rule,

therefore, include:

• Uncertainties in the estimation of

future year emissions inventories and

air quality,

• Uncertainties associated with the

extrapolation of air quality monitoring

data to some unmonitored areas

required to better capture the effects of

the standards on affected populations,

and

• Uncertainties associated with the

effect of potential future actions to limit

emissions.

Despite these uncertainties, which are

discussed in more detail or referenced

in the RIA, we believe the BCA provide

a reasonable indication of the expected

economic benefits of the Tier 2 program

in 2030 under one set of assumptions.

This is because the analysis focuses on

estimating the economic effects of the

changes in air quality conditions

expected to result from today’s action,

rather than focusing on developing a

precise prediction of the absolute levels

of air quality likely to prevail in 2030.

An analysis focusing on the changes in

air quality can give useful insights into

the likely economic effects of emission

reductions of the magnitude expected to

result from today’s rule.

d. How Has the Benefit-Cost Analysis

Changed From Proposal?

We significantly improved the

analysis that was presented at proposal.

For the final rule, EPA updated the

emissions inventory from 1990 to 1996

using updated models, refined the

projections of the effects of the rule

when it is fully implemented, and

updated our air quality modeling to

reflect new programs issued since 1990.

In addition, we also updated our

assumptions for estimating physical

effects and monetary benefits based on

recommendations from the EPA’s

Science Advisory Board (SAB) during

the summer of 1999. Details on these

recommendations can be found in the

advisory statements published by the

SAB.105 All of the changes made since

the analysis at proposal serve to update

and improve the analysis.

e. How Did We Perform the Benefit-Cost

Analysis?

The analytical sequence begins with a

projection of the mix of technologies

likely to be deployed to comply with the

new standards, and the costs incurred

and emissions reductions achieved by

these changes in technology. The Tier 2

program has various cost and emission

related components, as described earlier

in this section. These components

would begin at various times and in

some cases would phase in over time.

This means that during the early years

of the program there would not be a

consistent match between cost and

benefits. This is especially true for the

vehicle control portions of the program,

where the full vehicle cost would be

incurred at the time of vehicle purchase,

while the fuel cost along with the

emission reductions and benefits would

occur throughout the lifetime of the

vehicle.

To develop a benefit-cost number that

is representative of a fleet of Tier 2

vehicles, we need to have a stable set of

cost and emission reductions to use.

This means using a future year where

the fleet is fully turned over and there

is a consistent annual cost and annual

emission reduction. For the Tier 2

program, this stability would not occur

until well into the future. For this

analysis, we selected the year 2030. The

resulting analysis represents a snapshot

of benefits and costs in a future year in

which the light-duty fleet consists

almost entirely of Tier 2 vehicles. As

such, it depicts the maximum emission

reductions (and resultant benefits) and

among the lowest costs that would be

achieved in any one year by the program

on a ‘‘per mile’’ basis. (Note, however,

that net benefits would continue to grow

over time beyond those resulting from

this analysis, because of growth in

population and vehicle miles traveled.)

Thus, based on the long-term costs for

a fully turned over fleet, the resulting

benefit-cost ratio will be close to its

maximum point (for those benefits

which we have been able to value).

To present a BCA, we designed the

cost estimate to reflect conditions in the

same year as the benefit valuation. Costs

are, therefore, developed for the year

2030 fleet. For this purpose we used the

long term cost once the capital costs

have been recovered and the

manufacturing learning curve

6782 Federal Register / Vol. 65, No. 28 / Thursday, February 10, 2000 / Rules and Regulations

106Though California is included based on the

expectation that reductions in surrounding states

will achieve some benefits in California, this

analysis does not assume additional reductions in

California emissions beyond those already achieved

by prevailing standards.

reductions have been realized, since this

will be the case in 2030.

We also made adjustments in the

costs to account for the fact that there

is a time difference between when some

of the costs are expended and when the

benefits are realized. The vehicle costs

are expended when the vehicle is sold,

while the fuel related costs and the

benefits are distributed over the life of

the vehicle. We resolved this difference

by using costs distributed over time

such that there is a constant cost per ton

of emissions reduction and such that the

net present value of these distributed

costs corresponds to the net present

value of the actual costs.

The resulting adjusted costs are

somewhat greater than the expected

actual annual cost of the program,

reflecting the time value adjustment.

Thus, the costs presented in this section

do not represent expected actual annual

costs for 2030. Rather, they represent an

approximation of the steady-state cost

per ton that would likely prevail in that

time period. The benefit cost ratio for

the earlier years of the program would

be expected to be lower than that based

on these costs, since the per-vehicle

costs are larger in the early years of the

program while the benefits are smaller.

In order to estimate the changes in air

quality conditions which would result

from these emissions reductions, we

developed two separate, year 2030

emissions inventories to be used as

inputs to the air quality models. The

first, baseline inventory, reflects the best

available approximation of the countyby-county emissions for NOX, VOC, and

SO2 expected to prevail in the year 2030

in the absence of the standards. To

generate the second, control case

inventory, we first estimated the change

in vehicle emissions, by pollutant and

by county, expected to be achieved by

the 2030 control scenario described

above. We then took the baseline

emissions inventory and subtracted the

estimated reduction for each countypollutant combination to generate the

second, control case emissions

inventory. Taken together, the two

resulting emissions inventories reflect

two alternative states of the world and

the differences between them represent

our best estimate of the reductions in

emissions which would result from our

control scenario.

With these two emissions inventories

in hand, the next step was to ‘‘map’’ the

county-by-county and pollutant-bypollutant emission estimates to the

input grid cells of two air quality

models and one deposition model. The

first model, called the Urban Airshed

Model (UAM), is designed to estimate

the tropospheric ozone concentrations

resulting from a specific inventory of

emissions of ozone precursor pollutants,

particularly NOX and NMHC. The

second model, called the Climatological

Regional Dispersion Model SourceReceptor Matrix model (S–R Matrix), is

designed to estimate the changes in

ambient particulate matter and visibility

which would result from a specific set

of changes in emissions of primary

particulate matter and secondary

particulate matter precursors, such as

SO2, NOX, and NMHC. Also, nitrogen

loadings to watersheds were estimated

using factors derived from previous

modeling from the Regional Acid

Deposition Model (RADM). By running

both the baseline and control case

emissions inventories through these

models, we were able to estimate the

expected 2030 air quality conditions

and the changes in air quality

conditions which would result from the

emissions reductions expected to be

achieved by the Tier 2 program.

After developing these two sets of

year 2030 air quality profiles, we used

the same health and environmental

effect models used in the section 812

studies to calculate the differences in

human health and environmental

outcomes projected to occur with and

without the proposed standards.

Specifically, we used the Criteria Air

Pollutant Modeling System (CAPMS) to

estimate changes in human health

outcomes, and the Agricultural

Simulation Model (AGSIM) to estimate

changes in yields of a selected few

agricultural crops. In addition, the

impacts of reduced visibility

impairment and estimates of the effect

of changes in nitrogen deposition to a

selection of sensitive estuaries were

estimated using slightly modified

versions of the methods used in the

section 812 studies. Several air qualityrelated health and environmental

benefits, however, could not be

calculated for the BCA of today’s

proposed standards. Changes in human

health and environmental effects due to

changes in ambient concentrations of

carbon monoxide (CO), gaseous sulfur

dioxide (SO2), gaseous nitrogen dioxide

(NO2), and hazardous air pollutants

could not be included. In addition,

some health and environmental benefits

from changes in ozone and PM could

not be included in our analysis (i.e.,

commercial forestry benefits).

To characterize the total economic

value of the reductions in adverse

effects achieved across the lower 48

states,106 we used the same set of

economic valuation coefficients and

models used in the section 812 studies,

as approved by the SAB. The net

monetary benefits of the Tier 2 program

were then calculated by subtracting the

estimated costs of compliance from the

estimated monetary benefits of the

reductions in adverse health and

environmental effects.

The last step of the analysis is to

characterize the uncertainty

surrounding our estimate of benefits.

Again, we follow the recommendations

of the SAB for the presentation of

uncertainty. They recommend that a

primary estimate should be presented

along with a description of the

uncertainty associated with each

endpoint. At proposal, our

characterization of uncertainty was

based on an estimated range of benefits

which might occur if important but

uncertain underlying factors were

allowed to vary. This approach,

however, is criticized by the SAB

because while the low- or high-end

estimates provided for individual

endpoints was ‘‘plausible,’’ the

probability of all of the assumptions in

these estimates occurring

simultaneously was likely to be small.

Therefore, for the final Tier 2/gasoline

sulfur rule, the benefit analysis adopts

an approach similar to the section 812

study. Our analysis first presents our

estimate for a primary set of benefit

endpoints followed by a presentation of

‘‘alternative calculations’’ of key health

and welfare endpoints to characterize

the uncertainty in this primary set.

However, the adoption of a value for the

projected reduction in the risk of

premature mortality is the subject of

continuing discussion within the

economic and public policy analysis

community within and outside the

Administration. In response to the

sensitivity on this issue, we provide

estimates reflecting two alternative

approaches for mortality benefits: the

EPAs preferred approach using the

value of a statistical life, and an

alternative approach using the value of

a statistical life years. These are

discussed further in section f. of this

presentation. The presentation of the

alternative calculations for certain

endpoints seeks to demonstrate how

much the overall benefit estimate might

vary based on the value EPA has given

to a parameter (which has some

uncertainty associated with it)

underlying the estimates for human

health and environmental effect

incidence and the economic valuation

Federal Register / Vol. 65, No. 28 / Thursday, February 10, 2000 / Rules and Regulations 6783

of those effects. These alternative

calculations represent conditions that

are possible to occur, however, EPA has

selected the best supported values based

on current scientific literature for use in

the primary estimate. The alternate

calculations include:

• Presentation of an estimated

confidence interval around the Primary

estimate of benefits to characterize The

standard error in the C-R and valuation

studies used in developing benefit

estimates for each endpoint;

• Valuing PM-related premature

mortality based on a different C-R study;

• Value of avoided premature

mortality incidences based on statistical

life years;

• Consideration of reversals in

chronic bronchitis treated as lowest

severity cases;

• Value of visibility changes in all

Class I areas;

• Value of visibility changes in

Eastern U.S. residential areas;

• Value of visibility changes in

Western U.S. residential areas;

• Value of reduced household soiling

damage; and

• Avoided costs of reducing nitrogen

loadings in east coast estuaries.

For instance, the study by Dockery, et

al. estimates of the relationship between

PM exposure and premature mortality is

a plausible alternative to the Pope, et al.

study used for the Primary estimate of

benefits. The SAB has noted that ‘‘the

study had better monitoring with less

measurement error than did most other

studies’’ (EPA–SAB–COUNCIL–ADV–

99–012, 1999). The Dockery study had

a more limited geographic scope (and a

smaller study population) than the

Pope, et al. study and the Pope study

appears more likely to mitigate a key

source of potential confounding. The

Dockery study also covered a broader

age category (25 and older compared to

30 and older in the Pope study) and

followed the cohort for a longer period

(15 years compared to 8 years in the

Pope study). For these reasons, the

Dockery study is considered to be a

plausible alternative estimate of the

avoided premature mortality incidences

associated with the final Tier 2/gasoline

sulfur rule. The alternative estimate for

mortality can be substituted for the

valuation component in our primary

estimate of mortality benefits to observe

how the net benefits of the program may

be influenced by this assumption.

Unfortunately, it is not possible to

combine all of the assumptions used in

the alternate calculations to arrive at

different total benefit estimates because,

it is highly unlikely that the selected

combination of alternative values would

all occur simultaneously. Therefore, it is

better to consider each alternative

calculation individually to assess the

uncertainty in the estimate.

In addition to the estimate for the

primary set of endpoints and alternative

calculations of benefits, our RIA also

presents an appendix with

supplemental benefit estimates and

sensitivity analyses of other key

parameters in the benefit analysis that

have greater uncertainty surrounding

them due to limitations in the scientific

literature. Supplemental estimates are

presented for premature mortality

associated with short-term exposures to

PM and ozone, asthma attacks,

occurrences of moderate or worse

asthma symptoms, and an estimate of

the avoided incidences of premature

mortality in infants.

Even with our efforts to fully disclose

the uncertainty in our estimate, this

uncertainty presentation method does

not provide a definitive or complete

picture of the true range of monetized

benefits estimates. This approach, as

implemented in this BCA, does not

reflect important uncertainties in earlier

steps of the analysis, including

estimation of compliance technologies

and strategies, emissions reductions and

costs associated with those technologies

and strategies, and air quality and

deposition changes achieved by those

emissions reductions. Nor does this

approach provide a full accounting of

all potential benefits associated with the

Tier 2/gasoline sulfur standards, due to

data or methodological limitations.

Therefore, the uncertainty range is only

representative of those benefits that we

were able to quantify and monetize.

f. What Were the Results of the BenefitCost Analysis?

The BCA for the Tier 2 program

reflects a single year ‘‘snapshot’’ of the

yearly benefits and costs expected to be

realized once the standards have been

fully implemented and non-compliant

vehicles have all been retired. Near-term

costs will be higher than long-run costs

as vehicle manufacturers and oil

companies invest in new capital

equipment and develop and implement

new technologies. In addition, near-term

benefits will be lower than long-run

benefits because it will take a number of

years for Tier 2-compliant vehicles to

fully displace older, more polluting

vehicles. However, as described earlier,

we have adjusted the cost estimates

upward to compensate for some of this

discrepancy in the timing of benefits

and costs and to ensure that the longterm benefits and costs are calculated on

a consistent basis. The resulting

adjusted long-term cost value is given in

Table IV.D.–5a. Because of the

adjustment process, the cost estimates

should not be interpreted as reflecting

the actual costs expected to be incurred

in the year 2030. Actual program costs

can be found in Section IV.D.3.

TABLE IV.D.–5A.—ADJUSTED COST OF

THE TIER 2/GASOLINE SULFUR RULE

FOR COMPARISON TO BENEFITS

Cost basis

Adjusted

cost

(billions of

dollars)

Long term a ............................... 5.3

Notes:

a Note that this estimate of cost is only for

purposes of comparing with our 2030 benefits

estimate. See Figure IV.D.–1 for our portrayal

of total annualized cost of the rule.

With respect to the benefits, several

different measures of benefits can be

useful to compare and contrast to the

estimated compliance costs. These

benefit measures include (a) the tons of

emissions reductions achieved, (b) the

reductions in incidences of adverse

health and environmental effects, and

(c) the estimated economic value of

those reduced adverse effects.

Calculating the cost per ton of pollutant

reduced is particularly useful for

comparing the cost-effectiveness of the

new standards or programs against

existing programs or alternative new

programs achieving reductions in the

same pollutant or combination of

pollutants. The cost-effectiveness

analysis presented earlier in this

preamble provides such calculations on

a per-vehicle basis. Considering the

absolute numbers of avoided adverse

health and environmental effects can

also provide valuable insights into the

nature of the health and environmental

problem being addressed by the rule as

well as the magnitude of the total public

health and environmental gains

potentially achieved by the rule.

Finally, when considered along with

other important economic dimensions

—including environmental justice,

small business financial effects, and

other outcomes related to the

distribution of benefits and costs among

particular groups— the direct

comparison of quantified economic

benefits and economic costs can provide

useful insights into the potential

magnitude of the estimated net

economic effect of the rule, keeping in

mind the limited set of effects we are

able to monetize.

Table IV.D.–6 presents the EPAs

preferred approach to estimate the

benefits of both the estimated

reductions in adverse effect incidences

and the estimated economic value of

6784 Federal Register / Vol. 65, No. 28 / Thursday, February 10, 2000 / Rules and Regulations

107Specifically, the VSLY estimate is calculated

by amortizing the $5.9 million mean VSL estimate

over the 35 years of life expectancy associated with

subjects in the labor market studies. The resulting

estimate, using a 5 percent discount rate, is

$360,000 per life-year saved in 1997 dollars. This

annual average value of a life-year is then

multiplied times the number of years of remaining

life expectancy for the affected population (in the

case of PM-related premature mortality, the average

number of $ life-years saved is 14.

those incidence reductions. Specifically,

the table lists the avoided incidences of

individual health and environmental

effects, the pollutant associated with

each of these endpoints, and the

estimated economic value of those

avoided incidences. For several effects,

particularly environmental effects,

direct calculation of economic value in

response to air quality conditions is

performed, eliminating the intermediate

step of calculating incidences. As the

table indicates, we estimate that the Tier

2 program will produce 2300 fewer

cases of chronic bronchitis, and we also

see significant improvements in minor

restricted activity days (with an

estimated 6,255,500 fewer cases). Our

estimate also incorporates significant

reductions in impacts on children’s

health, showing reductions of 7,900

cases of acute bronchitis, 87,200 fewer

cases of lower respiratory symptoms,

and 86,600 fewer cases of upper

respiratory symptoms in asthmatic

children.

Total monetized benefits, however,

are driven primarily by the estimated

4300 fewer premature fatalities. The

adoption of a value for the projected

reduction in the risk of premature

mortality is the subject of continuing

discussion within the economic and

public policy analysis community

within and outside the Administration.

In response to the sensitivity on this

issue, we provide estimates reflecting

two alternative approaches. The first

approach—supported by some in the

above community and preferred by

EPA—uses a Value of a Statistical Life

(VSL) approach developed for the Clean

Air Act Section 812 benefit-cost studies.

This VSL estimate of $5.9 million

(1997$) was derived from a set of 26

studies identified by EPA using criteria

established in Viscusi (1992), as those

most appropriate for environmental

policy analysis applications.

An alternative, age-adjusted approach

is preferred by some others in the above

community both within and outside the

Administration. This approach was also

developed for the Section 812 studies

and addresses concerns with applying

the VSL estimate—reflecting a valuation

derived mostly from labor market

studies involving healthy working-age

manual laborers—to PM-related

mortality risks that are primarily

associated with older populations and

those with impaired health status. This

alternative approach leads to an

estimate of the value of a statistical life

year (VSLY), which is derived directly

from the VSL estimate. It differs only in

incorporating an explicit assumption

about the number of life years saved and

an implicit assumption that the

valuation of each life year is not affected

by age.107 The mean VSLY is $360,000

(1997$); combining this number with a

mean life expectancy of 14 years yields

an age-adjusted VSL of $3.6 million

(1997$).

Both approaches are imperfect, and

raise difficult methodological issues

which are discussed in depth in the

recently published Section 812

Prospective Study, the draft EPA

Economic Guidelines, and the peerreview commentaries prepared in

support of each of these documents. For

example, both methodologies embed

assumptions (explicit or implicit) about

which there is little or no definitive

scientific guidance. In particular, both

methods adopt the assumption that the

risk versus dollars trade-offs revealed by

available labor market studies are

applicable to the risk versus dollar

trade-offs in an air pollution context.

EPA currently prefers the VSL

approach because, essentially, the

method reflects the direct, application

of what EPA considers to be the most

reliable estimates for valuation of

premature mortality available in the

current economic literature. While there

are several differences between the labor

market studies EPA uses to derive a VSL

estimate and the particulate matter air

pollution context addressed here, those

differences in the affected populations

and the nature of the risks imply both

upward and downward adjustments.

For example, adjusting for age

differences may imply the need to

adjust the $5.9 million VSL downward

as would adjusting for health

differences, but the involuntary nature

of air pollution-related risks and the

lower level of risk-aversion of the

manual laborers in the labor market

studies may imply the need for upward

adjustments. In the absence of a

comprehensive and balanced set of

adjustment factors, EPA believes it is

reasonable to continue to use the $5.9

million value while acknowledging the

significant limitations and uncertainties

in the available literature. Furthermore,

EPA prefers not to draw distinctions in

the monetary value assigned to the lives

saved even if they differ in age, health

status, socioeconomic status, gender or

other characteristic of the adult

population.

Those who favor the alternative, ageadjusted approach (i.e. the VSLY

approach) emphasize that the value of a

statistical life is not a single number

relevant for all situations. Indeed, the

VSL estimate of $5.9 million (1997

dollars) is itself the central tendency of

a number of estimates of the VSL for

some rather narrowly defined

populations. When there are significant

differences between the population

affected by a particular health risk and

the populations used in the labor market

studies—as is the case here—they prefer

to adjust the VSL estimate to reflect

those differences. While acknowledging

that the VSLY approach provides an

admittedly crude adjustment (for age

though not for other possible differences

between the populations), they point

out that it has the advantage of yielding

an estimate that is not presumptively

biased. Proponents of adjusting for age

differences using the VSLY approach

fully concur that enormous uncertainty

remains on both sides of this estimate—

upwards as well as downwards—and

that the populations differ in ways other

than age (and therefore life expectancy).

But rather than waiting for all relevant

questions to be answered, they prefer a

process of refining estimates by

incorporating new information and

evidence as it becomes available.

In addition to the presentation of

mortality valuation, this table also

indicates with a ‘‘B’’ those additional

health and environmental benefits

which could not be expressed in

quantitative incidence and/or economic

value terms. A full listing of the benefit

categories that could not be quantified

or monetized in our estimate are

provided in Table IV.D.–8. For instance,

visibility is expected to improve in all

areas of the country, with the largest

improvements occurring in heavily

populated residential areas (e.g., 21% of

the metropolitan areas show an

improvement of 0.5 deciviews or more).

However, due to limitations on sources

to value these effects, we include a ‘‘B’’

in the primary estimate table for this

category. Likewise, the Tier 2/gasoline

sulfur rule will also provide progress for

some estuaries to meet their goals for

reducing nitrogen deposition (e.g.,

nitrogen loadings for the Albemarle/

Pamlico Sound are reduced by 27% of

their reductions goal), however, this

endpoint is also displayed with a ‘‘B’’ in

the table. A full appreciation of the

overall economic consequences of the

Tier 2/gasoline sulfur standards requires

consideration of all benefits and costs

expected to result from the new

standards, not just those benefits and

Federal Register / Vol. 65, No. 28 / Thursday, February 10, 2000 / Rules and Regulations 6785

costs which could be expressed here in

dollar terms.

In summary, the VSL approach—the

approach EPA prefers—yields a

monetized benefit estimate of $25.2

billion in 2030. The alternative, ageadjusted VSLY approach (presented in

Table IV.D.7) yields monetary benefits

of approximately $13.8 billion in 2030.

TABLE IV.D.–6.—EPA PREFERRED ESTIMATE OF THE ANNUAL QUANTIFIED AND MONETIZED BENEFITS ASSOCIATED WITH

IMPROVED AIR QUALITY RESULTING FROM THE TIER 2/GASOLINE SULFUR RULE IN 2030

Endpoint Pollutant

Avoided

incidencec

(cases/year)

Monetary

benefitsd

(millions 1997$)

Premature mortality a, b (adults, 30 and over) .............................................. PM b ....................................... 4,300 ................ $23,380

Chronic asthma (adult males, 27 and over) ................................................ Ozone ................................... 400 ................... 10

Chronic bronchitis ........................................................................................ PM ......................................... 2,300 ................ 730

Hospital Admissions from Respiratory Causes ........................................... Ozone and PM ...................... 2,200 ................ 20

Hospital Admissions from Cardiovascular Causes ...................................... Ozone and PM ...................... 800 ................... 10

Emergency Room Visits for Asthma ............................................................ Ozone and PM ...................... 1,200 ................ <1

Acute bronchitis (children, 8–12) ................................................................. PM ......................................... 7,900 ................ <1

Lower respiratory symptoms (LRS) (children, 7–14) ................................... PM ......................................... 87,100 .............. <5

Upper respiratory symptoms (URS) (asthmatic children, 9–11) .................. PM ......................................... 86,500 .............. <5

Shortness of breath (African American asthmatics, 7–12) .......................... PM ......................................... 17,400 .............. <1

Work loss days (WLD) (adults, 18–65) ........................................................ PM ......................................... 682,900 ............ 70

Minor restricted activity days (MRAD)/Acute respiratory symptoms ........... Ozone and PM ...................... 5,855,000 ......... 270

Other health effects c .................................................................................... Ozone, PM, CO, HAPS ........ U1+U2+U3+U4 ... B1+B2+B3+B4

Decreased worker productivity ..................................................................... Ozone ................................... ........................... 140

Recreational visibility (86 Class I Areas) ..................................................... PM ......................................... ........................... 370

Residential visibility ...................................................................................... PM ......................................... ........................... B5

Household soiling damage ........................................................................... PM ......................................... ........................... B6

Materials damage ......................................................................................... PM ......................................... ........................... B7

Nitrogen Deposition to Estuaries ................................................................. Nitrogen ................................ ........................... B8

Agricultural crop damage (6 crops) ............................................................. Ozone ................................... ........................... 220

Commercial forest damage .......................................................................... Ozone ................................... ........................... B9

Other welfare effects e .................................................................................. Ozone, PM, CO, HAPS ........ ........................... B10+B11+B12+B13

Monetized Total f, g ............................................................................ ............................................... ........................... $25,220+B

Notes:

aPremature mortality associated with ozone is not separately included in this analysis. It is assumed that the Pope, et al. C–R function for premature mortality captures both PM mortality benefits and any mortality benefits associated with other air pollutants. Also note that the valuation

assumes the 5 year distributed lag structure described earlier. bPM reductions are due to reductions in NOX and SO2 resulting from the Tier 2/Gasoline Sulfur rule. c Incidences are rounded to the nearest 100.

d Dollar values are rounded to the nearest 10 million.

eThe Ui are the incidences and the Bi are the values for the unquantified category i. A detailed listing of unquantified PM, ozone, CO, and

HAPS related health and welfare effects is provided in Table IV.D.–8. fB is equal to the sum of all unmonetized categories, i.e. B1+B2+ * * * +B13. gThese estimates are based on the EPA preferred approach for valuing reductions in premature mortality, the VSL approach. This approach

and an alternative, age-adjusted approach—the VSLY approach—are discussed more fully in section f above.

TABLE IV.D.–7.—TIER 2/GASOLINE SULFUR RULE: 2030 MONETIZED BENEFITS ESTIMATES FOR ALTERNATIVE PREMATURE

MORTALITY VALUATION APPROACHES

[Millions of 1997 dollars]

Premature mortality valuation approach PM mortality

benefits Total benefits

Value of statistical life (VSL) ($5.9 million per life saved) a ....................................................................................... $23,380 $25,220 + B

Value of statistical life-years (VSLY) ($360,000 per life-year saved, which implies $3.6 million per life saved,

based on the mean of 14 life years saved) a,b.

11,900 13,790 + B

Notes:

aPremature mortality estimates are determined assuming a 5 year distributed lag, which applies 25 percent of the incidence in year 1 and 2,

and then 16.7 percent of the incidence in years 3, 4, and 5.

bThe VSLY estimate is calculated by amortizing the $5.9 million mean VSL estimate over the 35 years of life expectancy associated with subjects in the labor market studies used to obtain the VSL estimate. The resulting estimate, using a 5 percent discount rate, is $360,000 per lifeyear saved in 1997 dollars. This approach is discussed more fully in section f above.

6786 Federal Register / Vol. 65, No. 28 / Thursday, February 10, 2000 / Rules and Regulations

TABLE IV.D.–8.—ADDITIONAL, NON-MONETIZED BENEFITS OF THE TIER 2/GASOLINE SULFUR STANDARDS

Pollutant Unquantified effects

Ozone Health ......................................................... Premature mortality.a

Increased airway responsiveness to stimuli.

Inflammation in the lung

Chronic respiratory damage

Premature aging of the lungs

Acute inflammation and respiratory cell damage

Increased susceptibility to respiratory infection

Non-asthma respiratory emergency room visits

Reductions in screening of UV–b radiation

Ozone Welfare ....................................................... Decreased yields for commercial forests

Decreased yields for fruits and vegetables

Decreased yields for non-commercial crops

Damage to urban ornamental plants

Impacts on recreational demand from damaged forest aesthetics

Damage to ecosystem functions

PM Health .............................................................. Infant mortality

Low birth weight

Changes in pulmonary function

Chronic respiratory diseases other than chronic bronchitis

Morphological changes

Altered host defense mechanisms

Nitrogen and Sulfate Deposition Welfare .............. Impacts of acidic sulfate and nitrate deposition on commercial forests

Impacts of acidic deposition to commercial freshwater fishing

Impacts of acidic deposition to recreation in terrestrial ecosystems

Reduced existence values for currently healthy ecosystems

Impacts of nitrogen deposition on commercial fishing, agriculture, and forests

Impacts of nitrogen deposition on recreation in estuarine ecosystems

CO Health .............................................................. Premature mortality a

Behavioral effects

Hospital admissions—respiratory, cardiovascular, and other

Other cardiovascular effects

Developmental effects

Decreased time to onset of angina

Non-asthma respiratory ER visits

HAPS Health .......................................................... Cancer (benzene, 1,3-butadiene, formaldehyde, acetaldehyde)

Anemia (benzene)

Disruption of production of blood components (benzene)

Reduction in the number of blood platelets (benzene)

Excessive bone marrow formation (benzene)

Depression of lymphocyte counts (benzene)

Reproductive and developmental effects (1,3-butadiene)

Irritation of eyes and mucus membranes (formaldehyde)

Respiratory irritation (formaldehyde)

Asthma attacks in asthmatics (formaldehyde)

Asthma-like symptoms in non-asthmatics (formaldehyde)

Irritation of the eyes, skin, and respiratory tract (acetaldehyde)

HAPS Welfare ........................................................ Direct toxic effects to animals

Bioaccumlation in the food chain

aPremature mortality associated with ozone and carbon monoxide is not separately included in this analysis. It is assumed that the Pope, et al.

C–R function for premature mortality captures both PM mortality benefits and any mortality benefits associated with other air pollutants.

In addition, in analyzing the present

rule, we recognized that the benefits

estimates were subject to a number of

uncertainties with other parameters. In

Table IV D–9, we present alternative

calculations representing the effect of

different assumptions on individual

elements of the benefits analysis and on

the total benefits estimate. For example,

this table can be used to answer

questions like ‘‘What would total

benefits be if we were to use the

Dockery, et al. C–R function to estimate

avoided premature mortality?’’ This

table also displays some assumptions

that can be made to value some of the

categories that are indicated with a ‘‘B’’

in the primary estimate. Overall, this

table provides alternative calculations

both for valuation issues (e.g., the

correct value for a statistical life saved)

and for physical effects issues (e.g., how

reversals in chronic illnesses are

treated). We show how the alternative

assumption being valued would change

the resulting total primary estimate, and

the percentage change from the primary

estimate associated with the alternative

calculation. This table is not meant to be

comprehensive. Rather, it reflects some

of the key issues identified by EPA or

commenters as likely to have a

significant impact on total benefits.

Federal Register / Vol. 65, No. 28 / Thursday, February 10, 2000 / Rules and Regulations 6787

108 Generally the provisions of this section V that

apply to HLDTs also apply to MDPVs. See section

IV.B.4.g for a thorough discussion of the main

program elements and how they impact MDPVs.

TABLE IV.D.–9.—ALTERNATIVE BENEFITS CALCULATIONS FOR THE TIER 2 GASOLINE SULFUR RULE IN 2030

Alternative calculation

Impact on

primary benefit

estimate

(million 1997$)

5th percentile of ‘‘measurement’’ uncertainty distribution .......................................................................................... ¥$20,300 (¥81%)

95th percentile of ‘‘measurement’’ uncertainty distribution ........................................................................................ +33,900 (+134%)

PM-related premature mortality based on Dockery et al. .......................................................................................... +30,200 (+120%)

Value of avoided premature mortality incidences based on statistical life years. ..................................................... ¥11,500 (¥46%)

Reversals in chronic bronchitis treated as lowest severity cases ............................................................................. +280 (+1%)

Value of visibility changes in all class I areas ........................................................................................................... +180 (+1%)

Value of visibility changes in eastern U.S. residential areas ..................................................................................... +420 (+2%)

Value of visibility changes in western U.S. residential areas .................................................................................... +130 (+1%)

Household soiling damage ......................................................................................................................................... +110 (+1%)

Avoided costs of reducing nitrogen loadings in east coast estuaries ....................................................................... +160 (+1%)

The estimated adjusted cost of

implementing the final Tier 2 program

is $5.3 billion (1997$), while the

estimate of monetized benefits using

EPA’s preferred approach for

monetizing reductions in PM-related

premature mortality—the VSL

approach—are $25.2 billion (1997$).

Monetized net benefits using EPA’s

preferred method for valuing avoided

incidences of premature mortality are

approximately $19.9 billion (1997$).

Using the alternative, age-adjusted

approach—the VSLY approach—total

monetized benefits are projected to be

around $13.8 billion (1997$). Monetized

net benefits using this approach are

approximately $8.5 billion (1997$).

Therefore, implementation of the Tier 2

program will provide society with a net

gain in social welfare. Tables VI.D.–10a

and IV.D.–10b summarize the costs,

benefits, and net benefits for the two

alternative valuation approaches.

TABLE IV.D.–10A.—2030 ANNUAL

MONETIZED COSTS, BENEFITS, AND

NET BENEFITS FOR THE FINAL TIER

2/GASOLINE SULFUR RULE: EPA

PREFERRED ESTIMATE USING THE

VALUE OF STATISTICAL LIVES SAVED

APPROACH TO VALUE REDUCTIONS

IN PREMATURE MORTALITY a

Billion 1997

(dollars)

Adjusted compliance costs ..... $5.3

Monetized PM-related benefits b.24.7+BPM

Monetized Ozone-related benefitsb.0.5+BOzone

Monetized net benefits c,d ........ 19.9+B

Notes:

aFor this section , all costs and benefits are

rounded to the nearest 100 million. Thus, figures presented in this chapter may not exactly

equal benefit and cost numbers presented in

earlier sections of the chapter.

b Not all possible benefits or disbenefits are

quantified and monetized in this analysis. Potential benefit categories that have not been

quantified and monetized are listed in Table

IV.D.–8. Unmonetized PM-and ozone-related

benefits are indicated by BPM. And BOzone, respectively. cB is equal to the sum of all unmonetized

benefits, including those associated with PM,

ozone, CO, and HAPS. dThese estimates are based on the EPA

preferred approach for valuing reductions in

premature morality, the VSL approach. This

approach and an alternative, age-adjusted approach—the VSLY approach—are discussed

more fully in section f above.

Table IV.D.–10b.—2030 Annual

Monetized Costs, Benefits, and

Net Benefits for the Final Tier 2/

Gasoline Sulfur Rule: Alternative

Estimates Using the Value of Statistical Life Years Saved Approach

to Value Reductions in Premature

Mortality a

Billion 1997

(dollars)

Adjusted compliance costs ..... $5.3

Monetized PM-related benefits b.$13.3+BPM

Monetized Ozone-related benefits b.$0.5+BOzone

Monetized net benefits c, d ....... $8.5+B

Notes:

aFor this section, all costs and benefits are

rounded to the nearest 100 million. Thus, figures presented in this chapter may not exactly

equal benefit and cost numbers presented in

earlier sections of the chapter. b Not all possible benefits or disbenefits are

quantified and monetized in this analysis. Potential benefit categories that have not been

quantified and monetized are listed in Table

IV.D.–8. Unmonetized PM-and ozone-related

benefits are indicated by BPM. And BOzone, respectively. cB is equal to the sum of all unmonetized

benefits, including those associated with PM,

ozone, CO, and HAPS.

dThe VSLY estimate is calculated by amortizing the $5.9 million mean VSL estimate over

the 35 years of life expectancy associated with

subjects in the labor market studies used to

obtain the VSL estimate. The resulting estimate, using a 5 percent discount rate, is

$360,000 per life-year saved in 1997 dollars.

This approach is discussed more fully in section f above.

V. Other Vehicle-Related Provisions

The section describes several

additional provisions of today’s final

rule that were not previously discussed

in this preamble.108

A. Final Tier 2 CO, HCHO and PM

Standards

Tables IV.B.–4 and –5 in Section

IV.B.4.a. above presented the Tier 2

standards for carbon monoxide (CO),

formaldehyde (HCHO), and particulate

matter (PM). The following paragraphs

discuss our selection of these specific

standards.

1. Carbon Monoxide (CO) Standards

Beyond aligning carbon monoxide

(CO) standards for all LDVs and LDTs,

and harmonizing with California vehicle

technology, reduction in CO emissions

is not a primary goal of the Tier 2

program. However, we note that more

than three-fourths of CO emissions in

1997 came from mobile sources and that

there are currently 20 officially

designated CO nonattainment areas in

the U.S. These areas include 47 counties

with a combined population of 34

million. In addition, there are 23

officially designated maintenance areas

also with a combined population of 34

million. Further, CO is a deadly gas that

leads to accidental poisoning fatalities

and injuries. Also, CO may play a role

in ozone formation by increasing the

reactivities of VOCs in the atmosphere.

Although there remain many areas of

nonattainment and maintenance for the

6788 Federal Register / Vol. 65, No. 28 / Thursday, February 10, 2000 / Rules and Regulations

109We recognize that the standards we are

finalizing for interim LDT4s are more stringent than

for equivalent vehicles (MDV3s) under Cal LEV I.

Still our interim HLDT standards harmonize with

Cal LEV I standards applicable to MDV2s.

110 Ibid.

CO NAAQS, and those areas include

large populations, the broad trends

indicate that ambient levels are being

reduced and the amount of further

reductions needed to meet the CO

NAAQS will not be as substantial as for

the ozone NAAQS. The reductions in

this program will help ensure that

emissions and ambient levels of CO

continue to decline, which will

contribute to the attainment and

maintenance of the CO NAAQS in

current nonattainment areas. These

standards will also ensure that CO

levels do not increase in the future,

which could exacerbate any CO

attainment and maintenance concerns.

Our analysis estimating of the tons of

CO reduction due to the Tier 2/Gasoline

Sulfur program is found in Chapter III

of the RIA.

Thus the CO standards we are

finalizing for all Tier 2 LDVs and LDTs

are essentially the same as those from

the NLEV program for LDV/LLDTs.

These standards will harmonize with

CalLEV II CO standards except at

California’s SULEV level (EPA Bin 2).

This lone divergence will not pose

additional burden to manufacturers

because the federal Tier 2 CO standards

for these vehicles will be less stringent

than California’s. Bins applicable during

the interim programs will include CO

values from the NLEV program for LDV/

LLDTs and from the Cal LEV I program

for HLDTs.109 In our NPRM, we

proposed tighter CO standards than

California for certain higher bins. Based

upon comment, we are aligning our CO

standards with those of California to

help ensure that carry over between the

two programs can occur.110 This

alignment is consistent with our goal of

bringing all LDVs and all categories of

LDTs under common standards that

allow for technology to be harmonized

to the extent possible with California.

Despite these minor changes, we still

expect the standards in today’s rule to

lead to CO reductions.

2. Formaldehyde (HCHO) Standards

Similar to our approach to CO

standards, we are aligning all Tier 2

LDVs and LDTs under the formaldehyde

standards from the NLEV program or

CalLEV II program. HLDTs, which are

not subject to the NLEV program, will

become subject to federal formaldehyde

standards for the first time under the

provisions of this rulemaking.

Formaldehyde is a hazardous air

pollutant and EPA is required to

regulate motor vehicle formaldehyde

under section 202(l) of the Act. The

standards finalized today are primarily

of concern for methanol and methane

(compressed natural gas or CNG)-fueled

vehicles, because formaldehyde is

chemically similar to methanol and

methane and is likely to be produced

when methanol or methane are not

completely burned in the engine.

HLDTs are not included under the

NLEV program and will therefore not

face formaldehyde standards as LDVs

and LLDTs will in 2001 (1999 in the

northeast states). We believe it is

appropriate to bring HLDTs under

HCHO standards in this rulemaking.

Applying formaldehyde standards to

HLDTs will be consistent with our goals

of aligning standards for all LDVs and

LDTs regardless of fuel type and

harmonizing technologically with

California standards wherever possible

and reasonable and the burden will be

minimal. Consequently, we are

including formaldehyde standards for

HLDTs under the Tier 2 program as well

as under the interim programs.

3. Use of NMHC Data To Show

Compliance with NMOG Standards;

Alternate Compliance With

Formaldehyde Standards

In response to comments, we are

finalizing a provision to allow

manufacturers to demonstrate

compliance with the interim and Tier 2

NMOG standards using NMHC data

(non-methane hydrocarbons) for

gasoline and diesel vehicles. For these

vehicles, NMOG and NMHC emissions

are very similar and testing for NMHC

is considerably simpler and cheaper

than measuring NMOG. Data available

to us show that NMHC emissions at

levels expected from interim and Tier 2

LDVs and LDTs can be adjusted to

represent NMOG emissions by a small

multiplicative factor. We are finalizing

to accept NMHC test results to

demonstrate compliance with the

NMOG standards, but are requiring that

the NMHC results be multiplied by 1.04.

We will permit the use of other

adjustment factors based upon

comparative testing.

A drawback to NMHC testing is that

NMHC testing does not yield

formaldehyde results as NMOG testing

does. We noted in the NPRM that HCHO

is actually a component of NMOG and

that we expect that all vehicles able to

meet the proposed Tier 2 or interim

standards (including methanol and

CNG-fueled vehicles) will readily

comply with the HCHO standards. In

fact, based upon a review of certification

data, we believe that gasoline and diesel

vehicles will be far below the HCHO

standards, perhaps by as much as 90%.

(See the Response to Comments

document for details)

To reduce testing costs while

harmonizing with the CalLEV II

standards we are finalizing a provision

that will permit manufacturers of

gasoline and diesel vehicles to

demonstrate compliance with the

formaldehyde standards based on

engineering judgement. This provision

will apply only to diesel and gasoline

fueled vehicles and will require

manufacturers to make a demonstration

in their certification application that

vehicles having similar engine and

vehicle size and engine and

aftertreatment technologies have been

shown to exhibit compliance with the

applicable formaldehyde standard for

their full useful life. This demonstration

will be similar to that currently required

for gasoline vehicles to demonstrate

compliance with the particulate matter

standard (see 40 CFR 86.1829(b)(1)), and

should be readily available from

California vehicles where NMOG testing

is required and formaldehyde data is

routinely generated.

4. Particulate Matter (PM) Standards

We proposed to adopt tighter PM

standards. For Tier 2 vehicles, we

proposed PM bin values such that PM

would consistently be 0.01 g/mi or less.

To provide manufacturers with

flexibility, we proposed a 0.02 g/mi PM

standard for vehicles that certify to the

highest Tier 2 bins. As we have

indicated elsewhere in this preamble,

we anticipate that low sulfur diesel fuel

will be available by 2007 to enable

diesel vehicles to utilize advanced

diesel technologies and meet these PM

standards.

For the interim standards we

proposed a PM standard of 0.06 g/mi for

the highest bins. We received

considerable comment from

manufacturers and others about the PM

standards we proposed. In the final rule,

we are raising the PM standard to 0.08

g/mi for bin 10. For HLDTs,

manufacturers would likely have had to

use advanced diesel technologies to

attain our proposed interim standards

and these technologies require low

sulfur diesel fuel. Since we do not

expect that fuel to be widely available

until the 2006–2007 timeframe, we are

raising the PM standard so that diesels

are not barred from the interim program

by a fuel situation beyond their

manufacturers’ control.

PM standards are primarily a concern

for diesel-cycle vehicles, but they also

apply to gasoline and other otto-cycle

Federal Register / Vol. 65, No. 28 / Thursday, February 10, 2000 / Rules and Regulations 6789

111SFTP requirements do not apply to MDPVs.

We plan to address the applicability of SFTP

standards and test procedures to MDPVs in a future

rulemaking.

112For vehicles included in the NLEV program,

this phase-in becomes a four year phase-in

beginning in 2001.

vehicles. We will continue to permit

otto-cycle vehicles to certify to PM

standards based on representative test

data from similar technology vehicles.

B. Useful Life

The ‘‘useful life’’ of a vehicle is the

period of time, in terms of years and

miles, during which a manufacturer is

formally responsible for the vehicle’s

emissions performance. For LDVs and

LDTs, there have historically been both

‘‘full useful life’’ values, approximating

the average life of the vehicle on the

road, and ‘‘intermediate useful life’’

values, representing about half of the

vehicle’s life. We proposed and are

finalizing several changes to the current

useful life provisions for LDVs and

LDTs.

1. Mandatory 120,000 Mile Useful Life

We are finalizing our proposal to

equalize full useful life values for all

Tier 2 LDVs and LDTs at 120,000 miles.

Congress, in directing EPA to perform

the Tier 2 study, also directed EPA to

consider changing the useful lives of

LDVs and LDTs. Manufacturers have

made numerous advances in quality,

materials and engineering that have led

to longer actual vehicle lives and data

show that each year of a vehicle’s life,

people are driving more miles. Current

data indicate that passenger cars are

driven approximately 120,000 miles in

their first ten years of life. Trucks are

driven further. Current regulatory useful

lives are 10 years/100,000 miles for

LDV/LLDTs and 11 years/120,000 miles

for HLDTs. We project, based on our

Tier 2 model, that approximately 13

percent of light-duty NOX and 11

percent of light-duty VOCs is produced

between 100,000 and 120,000 miles.

Given the trend toward longer actual

vehicle lives and increases in annual

mileage, we believe that it is reasonable

to extend the regulatory useful life

requirements California, in its LEV II

program, has adopted full useful life

standards for all LDVs and LDTs of 10

years or 120,000 miles, whichever

occurs first. The time period for federal

LDV/LLDTs will be 10 years, but will

remain at 11 years for HLDTs consistent

with the Clean Air Act. Intermediate

useful life values, where applicable, will

remain at 5 years or 50,000 miles,

whichever occurs first. Where

manufacturers elect to certify Tier 2

vehicles for 150,000 miles to gain

additional NOX credits, as discussed

below, the useful life of those vehicles

will be 15 years and 150,000 miles. We

are not harmonizing with California on

the mandatory useful life for

evaporative emissions of 15 years and

150,000 miles, but rather this useful life

will be mandatory for evaporative

emissions only when a manufacturer

elects optional 150,000 mile exhaust

emission certification.

We proposed to extend the useful life

of interim LDV/LLDTs to 10 years/

120,000 miles beginning in 2004. Based

upon extensive comment, we are not

finalizing that provision and the useful

lives of interim LDV/LLDTs will remain

unchanged to help facilitate their

carryover from the NLEV program into

the interim program. Commenters

provided persuasive argument that the

proposed provision, along with others,

would impose a large workload burden

on manufacturers because they would

be unable to carry over certification data

from 2003 and would have to recertify

virtually all of their LDV/LLDTs in

2004. Manufacturers stressed that this

would be an especially unproductive

use of their resources because these

vehicles would all have to be recertified

again as they were phased into the Tier

2 standards between 2005 and 2007.

This change in the final rule will have

only minimal impact on the benefits of

our program.

2. 150,000 Mile Useful Life Certification

Option

We are adopting as proposed a

provision to provide additional NOX

credit in the fleet average calculation for

vehicles certified to a useful life of

150,000 miles. A manufacturer

certifying a test group to a 150,000 mile

useful life will incorporate those

vehicles into its corporate NOX average

as if they were certified to a full useful

life standard 0.85 times the applicable

120,000 mile NOX standard. To use this

option, the manufacturer will have to

agree to (1) certify the engine family to

the applicable 120,000 mile exhaust and

evaporative standards at 150,000 miles

for all pollutants; and (2) increase the

mileage on the single extra-high mileage

in-use test vehicle from a minimum of

90,000 miles to a minimum of 105,000

miles.

Today’s vehicles are lasting longer

and being driven farther than those built

in past years and we believe it is

reasonable to encourage the

development of more durable emission

control systems. Consequently we

believe it is appropriate to provide

incentives to manufacturers to certify

their vehicles to extended useful lives

beyond 120,000 miles. This is why we

proposed and are today finalizing

additional NOX credits for Tier 2

vehicles certified to a useful life of

150,000 miles.

In the final rule we are adding an

option that, for a test group certified to

a 150,000 mile useful life, the

manufacturer may choose between the

additional credits or a waiver of

intermediate life standards. Commenters

suggested that some vehicles would be

discriminated against by our

intermediate life standards, because

they might have flat deterioration

curves, and could meet our full life

standards, but not the lower

intermediate life standards. We are

reluctant to give up our intermediate life

standards, because we believe they

provide an additional measure of

certainty that vehicles will meet

standards. Nonetheless, we believe that

certification to a longer useful life is an

important goal and that manufacturers

who do so will likely use technologies

that have very flat deterioration curves.

This option provides manufacturers

with the flexibility to certify vehicles

without having to comply with

intermediate life standards. In exchange

they must comply with full life

standards for considerably longer

mileage.

C. Supplemental Federal Test

Procedure (SFTP) Standards 111

1. Background

Supplemental Federal Test Procedure

(SFTP) standards require manufacturers

to control emissions from vehicles when

operated at high rates of speed and

acceleration (the US06 test cycle) and

when operated under high ambient

temperatures with air conditioning

loads (the SC03 test cycle). The existing

light duty SFTP requirements begin a

three year phase-in in model year 2000

for Tier 1 LDV/LLDTs.112 For HLDTs,

SFTP requirements begin a similar

phase-in in 2002. Intermediate and full

useful life SFTP standards exist for all

categories of Tier 1 vehicles except that

SFTP standards do not apply to diesel

fueled LDT2s and HLDTs. Table V.A.–

1 shows the full useful life federal SFTP

requirements applicable to Tier 1

vehicles.

6790 Federal Register / Vol. 65, No. 28 / Thursday, February 10, 2000 / Rules and Regulations

113This disparity arose because neither EPA nor

CARB had full useful life SFTP standards for LEVs

or ULEVs when the NLEV program was adopted.

Since a major requirement of the NLEV program

was harmony with California standards, EPA

adopted the California SFTP standards in place for

the NLEV time frame (2001 and later). 114Except that, we proposed to permit TLEV

vehicles (EPA interim Bin 10 in Table IV.B.–4),

which are not subject to new SFTP standards under

NLEV, to continue to meet Tier 1 SFTP standards,

and to permit HLDTs under the interim programs

to continue to meet Tier 1 SFTP standards that do

not fully phase in until the 2004 model year.

TABLE V.A.–1.—FULL USEFUL LIFE FEDERAL SFTP STANDARDS APPLICABLE TO TIER 1 VEHICLES

Vehicle category

NMHC + NOX

(weighted g/

mi) a

CO (g/mi) b

US06 SC03 Weighted

LDV/LDT1 (gasoline) ....................................................................................... 0.91 11.1 3.7 4.2

LDV/LDT1 (diesel) ........................................................................................... 2.07 11.1 — 4.2

LDT2 ................................................................................................................ 1.37 14.6 5.6 5.5

LDT3 ................................................................................................................ 1.44 16.9 6.4 6.4

LDT4 ................................................................................................................ 2.09 19.3 7.3 7.3

Notes:

aWeighting for NMHC+NOX and optional weighting for CO is 0.35x(FTP)+0.28x(US06)+0.37x(SC03). b CO standards are stand alone for US06 and SC03 with option for a weighted standard.

2. SFTP Under the NLEV Program

The NLEV program includes SFTP

requirements for LDVs, LDT1s and

LDT2s. These requirements impose the

Tier 1 intermediate and full useful life

SFTP standards on Tier 1 and TLEV

vehicles, but impose only 4000 mile

standards adopted from California LEV

I program on LEVs and ULEVs.113

NLEV SFTP standards for LEVs and

ULEVs are shown in Table V.A.–2.

Table V.A.–2 also includes the

California LEV I SFTP standards for

LDT3s and 4s. The standards in that

table do not provide for a weighted

standard for NMHC+ NOX or for CO, but

rather employ separate sets of standards

for the US06 and SC03 tests. Also, while

the NLEV and CAL LEV I SFTP

standards apply to gasoline and diesel

vehicles, they do not include a standard

for diesel particulates (PM).

TABLE V.A.–2.—SFTP STANDARDS FOR LEVS AND ULEVS IN THE NLEV/CAL LEV I PROGRAM

[4000 Mile Standards]

US06 SC03

NMHC+NOX (g/

mi) CO (g/mi) NMHC+NOX(g/mi) CO (g/mi)

LDV/LDT1 ...................................................................................................... 0.14 8.0 0.20 2.7

LDT2 .............................................................................................................. 0.25 10.5 0.27 3.5

LDT 3 (Calif MDV 2) ...................................................................................... 0.4 10.5 0.31 3.5

LDT 4 (Calif MDV 3) ...................................................................................... 0.6 11.8 0.44 4.0

3. SFTP Standards for Interim and Tier

2 LDVs and LDTs: As Proposed

Since no significant numbers of

vehicles certified to SFTP standards will

enter the fleet until 2001, manufacturers

raised concerns during the development

of the NPRM regarding significant

changes to the SFTP program before its

implementation. We stated in the NPRM

that it was reasonable not to increase

SFTP stringency beyond NLEV/CalLEV

I levels for the Tier 2 program, but we

proposed to include SFTP standards

adjusted for intermediate and full useful

life deterioration where there are

currently only 4000 mile standards.

Full useful life standards for Tier 2

vehicles are consistent with our

mandate under the Clean Air Act. We

derived the full and intermediate useful

life standards in the NPRM by applying

deterioration allowances from our draft

MOBILE 6 model to the existing 4000

mile standards for LDVs and LLDTs. For

HLDTs we applied similarly derived

deterioration allowances to California’s

LEV I SFTP standards for MDV2s and

MDV3s, which are the corresponding

categories to LDT3s and LDT4s in the

California LEV I program. The full and

intermediate useful life SFTP standards

we proposed would have applied to all

Tier 2 vehicles including Tier 2 LDT3s

and LDT4s. Further, since our interim

standards are derived from NLEV and

Cal LEV I standards, we proposed that

our full life SFTP standards would

apply to all interim LDV/LLDTs

beginning in 2004.114

4. Final SFTP Standards for Interim and

Tier 2 LDVs and LDTs

Based upon extensive comment from

manufacturers, we are persuaded that

our proposed intermediate and full life

SFTP standards need more review and

should possibly be reexamined in a

separate rulemaking. Manufacturers

were quite concerned that the technique

we used to obtain the intermediate and

full life SFTP standards led to standards

that were overly stringent. They argued

that they have little experience with

SFTP compliant vehicles given the

current infancy of the program and they

do not know whether SFTP emissions

can be reasonably be expected to

deteriorate like FTP emissions.

Consequently, in today’s notice, we are

finalizing a program that will adopt the

existing NLEV/Cal LEV I 4000 mile

standards and utilize adjusted full life

standards from the Tier 1 program,

instead of values derived by applying

the draft MOBILE 6 model.

These standards will apply to all Tier

2 vehicles and to all interim LDV/

LLDTs. We proposed and are finalizing

that interim HLDTs meet Tier 1 SFTP

standards which do not finish their

phase-in until the 2004 model year.

With regard to intermediate and full

life SFTP standards, the preamble to the

final rule implementing the SFTP

program for the Tier 1 SFTP emission

standards (61 FR 54856) provided a

formula for computing SFTP standards

to apply under more stringent future

Federal Register / Vol. 65, No. 28 / Thursday, February 10, 2000 / Rules and Regulations 6791

115The 4,000 mile standards under NLEV are

phased-in in such a way that diesels would not

likely be subject to them until the 2004 model year,

given their very small market share. Today’s

rulemaking effectively supercedes the NLEV

program beginning with the 2004 model year. In

other words, while NLEV contains 4,000 mile SFTP

standards for diesels, they are not likely to ever

impact diesel LDV/LLDTs.

FTP standards. In the Tier 1 program,

SFTP standards represent a weighted

average of FTP, US06 and SC03

standards. The three components are

weighted by factors of 0.35, 0.28, and

0.37 respectively. The formula simply

adjusts the Tier 1 SFTP weighted

average standards downward to reflect

the decrease in the component FTP

standards. The weighting factors remain

the same and the US06 and SC03

standards remain the same, but the

SFTP standard becomes tighter because

the FTP component becomes smaller.

These standards will take effect for all

LDV/LLDTs beginning in 2004 and will

phase in with the Tier 2 standards for

HLDTs in 2008 and 2009. The formula

is as follows:

New SFTP Standard = Old SFTP Standard ¥

[0.35 × (Tier 1 FTP standard ¥ New FTP

Standard)]

In today’s final rule, we will employ

this formula to compute full useful life

SFTP standards for all Tier 2 vehicles

and for interim LDV/LLDTs. Because we

are also adopting the California 4000

mile SFTP standards for these vehicles,

we are not adopting intermediate life

SFTP standards, so as to avoid the

burden of three sets of SFTP standards.

LDT3 and LDT4 SFTP standards do

not currently apply to diesels. Further,

the standards applicable to Tier 1 diesel

LDVs and LDT1s are less stringent than

gasoline standards and do not apply to

the SC03 cycle. There are no SFTP

standards under Tier 1 for diesel LDT2s.

In this final rule, we are applying the

same approach we are using with other

standards in this document to the Tier

2 and interim SFTP standards.

Consequently, we are finalizing that

Tier 2 vehicles and interim LDV/LLDTs

with diesel or gasoline engines must

comply with the same NMHC+NOX and

CO SFTP limits. Thus, in computing

Tier 2 SFTP full life standards for diesel

LDVs and LDT1s from Tier 1 values, the

values for diesels must be determined

from the standards applicable to

gasoline vehicles of the same category.

Because we lack certainty as to

whether diesel vehicles can comply

with the 4,000 mile SFTP standards for

gasoline vehicles that we are adopting

from the NLEV and Cal LEV I programs,

we are providing an option that diesel

LDV/LLDTs may comply with

intermediate life SFTP standards

instead.115 Manufacturers must

calculate intermediate life standards

using the same approach described for

full life standards, but must substitute

appropriate intermediate life values in

the equation above. This provision will

only apply through model year 2006,

and thus will likely only impact interim

non-Tier 2 vehicles, given the very

small market share that diesels occupy

and given our expectation that they will

be the last LDV/LLDTs phased into Tier

2 standards. We noted above that

interim non-Tier 2 HLDTs will have the

option of meeting Tier 1 SFTP

standards. Thus diesel HLDTs will not

have to comply with the 4,000 mile

standards in the interim years and the

option we are providing for LDV/LLDTs

is not needed for HLDTs.

5. Adding a PM Standard to the SFTP

Standards

We requested comment on the

appropriate SFTP PM standards for

diesel vehicles. We suggested it would

be appropriate to establish a margin

above the applicable FTP PM standard

to serve as the SFTP standard. EPA has

implemented such margins in recent

consent decrees, under which heavyduty engine manufacturers have agreed

not to exceed emission levels 1.25 times

the applicable exhaust standards

(including PM standards) when engines

are operated over a wide range of

operating conditions. We received

comments in favor of an SFTP PM

standard of 1.25 times the FTP standard

and we received many comments from

manufacturers against setting any SFTP

PM standard until more data become

available.

We believe it is reasonable to include

an SFTP standard for PM. However, we

are uncertain as to the technical

appropriateness of the 1.25 value for

passenger vehicles. Further, the 1.25

value would lead to an SFTP standard

for PM that would not match the

stringency of the other SFTP standards

we are finalizing. Consequently, we are

finalizing a procedure for computing

diesel PM standards that is nearly

identical to the procedure for computing

weighted SFTP standards for

NMHC+NOX and CO described above.

We believe standards computed in this

way will be readily feasible for both

gasoline and diesel vehicles.

To compute the SFTP PM standards,

manufacturers will use the same

formula described above for

NMHC+NOX and CO. Where that

formula calls for the Tier 1 SFTP

standard to be inserted, manufacturers

must insert the Tier 1 FTP standard.

This is because, under Tier 1 standards,

there is no SFTP standard for PM.

However, the Tier 1 weighted SFTP

standards are equal to the Tier 1 FTP

standards (or the sum of the Tier 1 FTP

standards in the case of NMHC+NOX).

Using the Tier 1 FTP PM standards in

this way will lead to a Tier 2 SFTP PM

standard whose stringency is

appropriately matched to the other

pollutants.

For HLDTs , we proposed and are

finalizing that Tier 1 SFTP standards

would apply through the interim

program. because of the late start of

SFTP phase-in for Tier 1 vehicles. We

see no reason to impose SFTP PM

standards on these vehicles during the

interim period when their

manufacturers will be under pressure to

develop diesel vehicles to comply with

the Tier 2 standards. Also, if we were to

impose an FTP PM standard on the

interim vehicles, it would likely be

matched to the interim phase in for

HLDTs and manufacturers would

simply defer compliance for diesels

until the last phase-in year (2007). The

manufacturers would then have to

recertify to the Tier 2 standards by 2009.

Given the relatively small number of

diesel vehicles, we believe the most

reasonable approach is to defer SFTP

PM standards for HLDTs until the Tier

2 phase-in. Consequently, we are

finalizing that Tier 2 HLDTs will have

to comply with an SFTP PM standard

computed as described above.

For LDV/LLDTs we are also including

the SFTP PM standard for the Tier 2

vehicles. There are only a few diesel

LDV/LLDTs currently produced and no

large increase in their numbers is

expected. We see little environmental

benefit in imposing the SFTP PM

standard on interim vehicles.

6. Future Efforts Relevant to SFTP

Standards

We are very concerned about ‘‘off

cycle’’ emissions, i.e. those emissions

that occur under vehicle operational

modes that are not captured in the FTP.

SFTP standards help to address our

concerns and we believe that they

should apply to all vehicles, regardless

of fuel. Our final rule essentially

promulgates Tier 1 SFTP standards that

are reduced to represent the reduction

in the FTP component standards. As we

indicate under our discussion of SFTP

for medium duty passenger vehicles (see

section IV.B.4.g) we expect to conduct a

rulemaking to establish appropriate

‘‘Tier 2’’ SFTP standards for all Tier 2

vehicles. In that rule, we expect to

reexamine the US06 and SC03 test

cycles and their applicability to vehicles

using different fuels and technologies,

6792 Federal Register / Vol. 65, No. 28 / Thursday, February 10, 2000 / Rules and Regulations

116The Compliance Assurance Program, (64 FR

23906) takes effect in the 2000 model year.

including whether these cycles are the

most appropriate ones for diesels. We

will also examine whether it is

necessary to have different sets of

standards for different vehicle sizes or

whether it is possible to establish one

set of standards for all vehicles.

D. LDT Test Weight

Historically, HLDTs (LDT3s and

LDT4s) have been emission tested at

their adjusted loaded vehicle weight

(ALVW), while LDVs, LDT1s, and

LDT2s have been tested at their loaded

vehicle weight (LVW). ALVW is

equivalent to the curb weight of the

truck plus half its maximum payload,

while LVW is equivalent to the curb

weight of the truck plus a driver and

one adult passenger (300 pounds). As

we are equalizing standards and useful

lives across LDVs and all categories of

LDTs, we believe it is appropriate to test

all the vehicles under the same

conditions. Therefore, we are finalizing

as proposed to test HLDTs at their

loaded vehicle weight. We believe this

is appropriate because the standards we

are imposing on HLDTs under Tier 2 are

considerably more stringent than the

Tier 1 standards. Further, one of our

reasons for bringing HLDTs under the

same standards as passenger cars is that

these trucks include many vans and

sport utility vehicles that are often used

as passenger cars with just one or two

passengers. Lastly, we note that testing

HLDTs at LVW is consistent with the

way they have been tested for fuel

economy purposes for many years.

Consequently, we believe it is

appropriate to test them at LVW.

The NPRM proposed that all HLDTs

would certify using LVW beginning in

the 2004 model year. Based upon

comments, the final rule will allow the

certification of HLDTs based on ALVW

until those vehicles are phased into the

Tier 2 standards in 2008 and 2009 at

which time they must be tested at LVW.

This will enhance carryover of

California vehicles to the Federal

interim program in cases where the

California vehicles meet our interim

standards.

E. Test Fuels

As discussed elsewhere in this

preamble, the NLEV program was

adopted virtually in its entirety from

California’s program. Because

California’s standards were developed

around the use of California Phase II

reformulated gasoline (RFG) as the

exhaust emission test fuel, we adopted

California Phase II test fuel as the

exhaust emission test fuel for gasolinefueled vehicles in the federal NLEV

program, although we recognized at the

time that vehicles outside of California

would be unlikely to operate on that

fuel in use. In the NPRM we proposed

interim programs that were derived

from NLEV (for LDV/LLDTs) and the

CAL LEVI program (for HLDTs), and we

proposed to accept certification test

results generated on California fuel, but

indicated that we might test or require

in-use testing on federal fuel.

Based upon comment we are

finalizing provisions to permit, for

interim vehicles, that if a test group has

been certified to the exhaust emission

standards using California fuel and is

being carried into the interim program

from NLEV or is being carried across

from California LEV I certification, then

we will not test or require in-use

exhaust testing on federal fuel. This

change is intended to help address

recertification workload concerns raised

by manufacturers. For new certification

not carried across from California LEV

I or carried over from NLEV, and for any

Tier 2 vehicles, we will accept exhaust

certification test results based on

California fuel for 50 state vehicles only,

but we will reserve the right to perform

or require certification confirmatory

testing and in-use testing on federal test

fuel.

We recognize that manufacturers may

want to perform calibration changes on

vehicles carried across from the

California LEV I program or carried over

from NLEV program. These calibration

changes will likely be aimed at

certifying the test group to the lowest

possible NOX value. We believe that

these calibration changes would be

appropriate, provided they can still be

covered by the existing worst case

durability data vehicle. We will perform

or require certification confirmatory

testing and in-use emission testing on

these vehicles using California fuel.

Because differences exist between the

California and federal evaporative

emission testing procedures, we

proposed to continue to require the use

of federal certification fuel as the test

fuel in evaporative emission testing.

Under current programs, where

California and federal evaporative

emission standards are essentially the

same, California accepts evaporative

results generated on the federal

procedure (using federal test fuel),

because available data indicates the

federal procedure to be a ‘‘worst case’’

procedure. The evaporative standards

California has adopted for their LEV II

program are more stringent than those

we are finalizing in this document. In

the NPRM, we requested comment and

supporting emission test data on

whether vehicles certified to CalLEV II

evaporative standards using California

fuels will necessarily comply with the

federal Tier 2 evaporative standards,

including ORVR standards, when tested

with federal test fuel. While we got

comments from manufacturers

advocating that we accept the results of

California evaporative testing to

demonstrate compliance with the

federal evaporative standards, we

received no supporting data. Still, given

the fairly large difference between

California and federal evaporative

standards, it seems reasonable that a

vehicle meeting the California standards

under California fuels and test

conditions might also meet federal

standards under federal fuels and

conditions. We believe it may be

possible for manufacturers to establish a

relationship between the two sets of

standards, fuels and conditions that

would enable us to grant federal

certification based upon data showing

conformity with the California

standards under California fuels and

conditions. Consequently, we are

including a provision in the certification

regulations to enable manufacturers to

obtain federal evaporative certification

based upon California results, if they

obtain advance approval from EPA. EPA

will review test data from manufacturers

to establish whether it is appropriate to

accept California data to demonstrate

compliance with federal standards.

F. Changes to Evaporative Certification

Procedures To Address Impacts of

Alcohol Fuels

Current certification procedures,

including regulations under the new

CAP2000 program,116 allow

manufacturers to develop their own

durability process for calculating

deterioration factors for evaporative

emissions. The regulations (§ 86.1824–

01) permit manufacturers to develop

service accumulation (aging) methods

based on ‘‘good engineering

judgement’’. The manufacturer’s

durability process must be designed to

predict the expected evaporative

emission deterioration of in-use vehicles

over their full useful lives. We proposed

and are finalizing requirements that

these aging methods include the use of

alcohol fuels to address concerns that

alcohol fuels increase the permeability

and thus the evaporative losses from

hoses and other evaporative

components. Based upon comment, we

are also finalizing an option to the

requirement that the manufacturer use

the alcohol fuel. Under this option, the

manufacturer may demonstrate to EPA

using good engineering judgement

Federal Register / Vol. 65, No. 28 / Thursday, February 10, 2000 / Rules and Regulations 6793

117Numerous SAE papers examine the

permeability of fuel and evaporative system

materials as well as the influence of alcohols on

permeability. See, for example SAE Paper #s

910104, 920163, 930992, 970307, 970309, 930992,

and 981360, copies of which are in the docket for

this rulemaking.

118 Ibid.

119California Exhaust Emission Standards and

Test Procedures for 2003 and Subsequent Model

Zero-Emission Vehicles, and 2001 and Subsequent

Model Hybrid Electric Vehicles. In the Passenger

Car, Light-Duty Truck and Medium-Duty Vehicle

Classes; adopted August 5, 1999.

acceptable to EPA that its durability

process for calculating evaporative

emission deterioration factors accurately

predicts deterioration under prolonged

exposure to alcohol fuels.

We have reviewed data indicating that

the permeability, and therefore the

evaporative losses, of hoses and other

evaporative components can be greatly

increased by exposure to fuels

containing alcohols.117 Alcohols have

been shown to promote the passage of

hydrocarbons through a variety of

different materials commonly used in

evaporative emission systems. Data from

component and fuel line suppliers

indicate that alcohols cause many

elastomeric materials to swell, which

opens up pathways for hydrocarbon

permeation and also can lead to

distortion and tearing of components

like ‘‘O’’ ring seals. Ethers such as

MTBE and ETBE have a much smaller

effect. Alcohol-resistant materials such

as fluoroelastomers are available and are

currently used by manufacturers to

varying extents.

Alcohols do not impact evaporative

components and hoses immediately, but

rather it may take as long as one year of

exposure to alcohol fuels for permeation

rates to stabilize. The end result is

higher permeation and increased in-use

evaporative emissions.118

Today, roughly 10% of fuel sold in

the U.S. contains alcohol, mainly in the

form of ethanol, and such fuels are often

offered in ozone nonattainment areas.

We believe it is appropriate to ensure

that evaporative certification processes

expose evaporative components to

alcohols and do so long enough to

stabilize their permeability. Therefore,

we are finalizing our proposal to the

evaporative certification requirements to

require manufacturers to develop their

deterioration factors using a fuel that

contains the highest legal quantity of

ethanol available in the U.S.

To implement this change, we are

modifying the Durability Demonstration

Procedures for Evaporative Emissions

found at § 86.1824–01. The amendments

will require manufacturers not using an

approved option, to age their systems

using a fuel containing the maximum

concentration of alcohols allowed by

EPA in the fuel on which the vehicle is

intended to operate, i.e., a ‘‘worst case’’

test fuel. (Under current requirements,

this fuel would be about 10% ethanol,

by volume.) We are also modifying the

Durability Demonstration Procedures to

require manufacturers to ensure that

their aging procedures are of sufficient

duration to stabilize the permeability of

the fuel and evaporative system

materials. These modifications will take

place as vehicles are phased into the

evaporative emission standards

contained in this final rule.

We requested comment on alternative

ways by which manufacturers could

document or demonstrate that their

components are made of materials

whose permeability is not significantly

affected by alcohols. We received no

comments responsive to this request,

but we did receive comments that EPA

should not change the CAP2000

provision allowing manufacturers to

develop their own durability process for

calculating evaporative emission

deterioration factors ‘‘using good

engineering judgement’’. We do not

wish to foreclose the possibility that an

alternative method may exist or may

arise in the future. Consequently, in the

final rule we will permit manufacturers

to use an optional method based on

good engineering judgement acceptable

to EPA. As an example, one method

would be for the manufacturer to show

that it is exclusively using materials

documented in the technical literature

to have low permeability in the

presence of alcohols.

G. Other Test Procedure Issues

California’s LEV II program

implements a number of minor changes

to exhaust emissions test procedures.

We have evaluated these changes and

found that, for tailpipe emissions, the

California test procedures fall within

ranges and specifications permitted

under the Federal Test Procedure.

With regard to hybrid electric vehicles

(HEVs) and zero emission vehicles

(ZEVs), we believe that these vehicles

will be predominantly available in

California, or that they will typically be

first offered for sale in California,

because of California’s ZEV

requirement, which promotes the sale of

HEVs and ZEVs. Where manufacturers

market HEVs or ZEVs outside of

California, it is likely that they will

market the same vehicles in California.

Consequently, we are finalizing our

proposal to incorporate by reference

California’s exhaust emission test

procedures for HEVs and ZEVs.119

In the NLEV program, we provided a

specific formula used by California that

could be used to compute an HEV

contribution factor to NMOG emissions.

This formula took into consideration the

range without engine operation of

various types of HEVs and had the effect

of reducing the NMOG emission

standard for a given emission bin (for

HEV vehicles only). This would have

obvious beneficial effects on a

manufacturer’s calculation of its

corporate NMOG average.

The technology of HEVs is under

rapid change and we do not believe that

we can design a formula now that will

accurately predict the impact of HEVs

on corporate average NOX emissions in

the Tier 2 time frame. Consequently, we

are finalizing the proposed provision by

which manufacturers could propose

HEV contribution factors for NOX to

EPA. If approved, these factors can be

used in the calculation of a

manufacturer’s fleet average NOx

emissions and will provide a

mechanism to credit an HEV for

operating with no emissions over some

portion of its life.

These factors will be based on good

engineering judgement and will

consider such vehicle parameters as

vehicle weight, the portion of the time

during the test procedure that the

vehicle operates with zero emissions,

the zero emission range of the vehicle,

NOX emissions from fuel-fired heaters

and any measurable NOX emissions

from on-board electricity production

and storage.

The final NLEV rule (See 62 FR pg

31219, June 6, 1997) incorporated by

reference California’s NMOG

measurement procedure and adopts

California’s approach of using Reactivity

Adjustment Factors (RAFs) to adjust

vehicle emission test results to reflect

differences in the impact on ozone

formation between an alternative-fueled

vehicle and a vehicle fueled with

conventional gasoline. As has been

discussed elsewhere in this preamble,

the NLEV program is a special case in

which California standards and

provisions were adopted virtually in

their entirety. In the preamble to the

final NLEV rule (See 62 FR 31203), we

expressed our reservations about the use

of RAFs. We also addressed our

reservations about the use of reactivity

factors developed in California in a

program that spans a range of climates

and geographic locations across the

United States in the final rule on

reformulated gasoline (RFG) (see 59 FR

7220). We continue to be concerned

about the validity of RAFs to predict

ozone formation nationwide and asked

the National Academy of Sciences to

6794 Federal Register / Vol. 65, No. 28 / Thursday, February 10, 2000 / Rules and Regulations

120Ozone-Forming Potential of Reformulated

Gasoline, May 1999. National Academy of Sciences;

National Academy Press. Available from the NAS

web site: http://www.nap.edu.

121California Evaporative Emission Standards

and Test Procedures for 2001 and Subsequent

Model Motor Vehicles. Adopted August 5, 1999.

122We define small volume manufacturers to be

those with total U.S. sales of less than 15,000

highway units per year. Independent commercial

importers (ICIs) with sales under 15,000 per year

are included under this term.

123For a graphical illustration of the phase-ins

through time, see Table IV.B.–2.

124 2005–2006 for vehicles where the small

volume manufacturer commences its 2004 model

year for all its 2004 vehicles before the fourth

anniversary date of the signature of this rule.

look at the scientific evidence in

support of the use of these factors

nationwide. While we have recently

received a report from NAS,120 we have

not yet developed a final position on

how RAFs should be treated in federal

regulations. We are finalizing as

proposed not to permit the use of RAFs

in the Tier 2 program.

The issue of RAFs is relevant

primarily to alcohol and CNG-fueled

vehicles. RAFs are not relevant at all if

a manufacturer elects to use NMHC data

to show compliance with the NMOG

standards. While, in our final rule,

alcohol and CNG vehicles will have to

comply with NMOG standards

beginning in 2004 and while we desire

to harmonize with California when

practical and reasonable, we will not

permit the use of RAFs for Tier 2

vehicles and interim non-Tier 2

vehicles. We note that we are finalizing

a provision from the NPRM that permits

dual fueled and flexible fueled vehicles

to elect an NMOG value from the next

higher bin when they are tested on an

alternative fuel. This provides flexibility

in compliance with applicable NMOG

standards for these vehicles. We do not

believe that dedicated alcohol or CNG

vehicles should have any problems

complying with the NMOG standards

we are finalizing and consequently the

relief these vehicles might get when

RAFs are employed is unnecessary.

In its LEV II program, California is

also implementing a number of changes

to evaporative emission test

procedures.121 Many of these changes

address the evaporative emission testing

of hybrid electric vehicles. We proposed

not to adopt California’s changes,

because California uses different test

temperatures and different test fuel in

its evaporative emission testing of

gasoline vehicles than we use in the

federal program. The preamble to the

final NLEV rule (See 62 FR 31227)

explains that California and EPA are

reviewing an industry proposal to

streamline and reconcile the California

and federal procedures. That work has

not been completed. However, where

California adopts procedures specific to

HEVs and ZEVs, we are adopting those

procedures, except that our testing will

occur at lower temperatures, and use a

fuel determined by EPA to be

representative of federal usage (for HEVs

only).

H. Small Volume Manufacturers

Our final rule includes the following

flexibilities intended to assist all

manufacturers in complying with the

stringent proposed standards without

harm to the program’s environmental

goals as presented in the NPRM:

• A four year phase-in of the

standards for LDV/LLDTs;

• A delayed phase-in for HLDTs;

• The freedom to select from specific

bins of standards;

• A standard that can be met through

averaging, banking and trading of NOX

credits;

• Provisions for NOX credit deficit

carryover; and,

• Provisions for alternative phase-in

schedules.

These flexibilities apply to all

manufacturers, regardless of size, and in

general we believe they eliminate the

need for more specific provisions for

small volume manufacturers.122

However, we proposed and are

finalizing one additional flexibility for

small volume manufacturers. Today’s

rule exempts small volume

manufacturers from the 25%, 50% and

75% Tier 2 phase-in requirements

applicable to the 2004, 2005 and 2006

LDV/LLDTs and the 50% phase-in

requirement applicable to 2008 HLDTs.

Instead, small volume manufacturers

will simply comply with the

appropriate Tier 2 100% requirement in

the 2007 and 2009 model year. In the

phase-in years, small volume

manufacturers will simply comply with

the appropriate interim standards for all

of their vehicles, except that we will

also exempt small volume

manufacturers from the 25%, 50% and

75% phase-in requirements for the 0.20

g/mi corporate average NOX standard

applicable to interim HLDTs in 2004–

2006. Small volume HLDT

manufacturers must simply comply

with the interim standards, including

the corporate average NOX standard, in

2007 for 100% of their vehicles. During

model years 2004–2006, these same

small volume manufacturers must

comply with any of the applicable bins

of standards for 100% of their

HLDTs.123, 124 Provisions to deal

with the leadtime issue related to

HLDTs and outlined in section IV.B.

apply to small volume manufacturers.

Therefore unless the small volume

manufacturer wants to use the optional

NMOG standards for interim LDT2s and

LDT4s, it may optionally meet the Tier

1 standards for its 2004 model year

HLDTs, provided it commences its

model year for those vehicles before the

fourth anniversary date of today’s

rulemaking.

As explained in the NPRM, we will

continue to apply the federal small

volume manufacturer provisions, which

provide relief from emission data and

durability showing and reduce the

amount of information required to be

submitted to obtain a certificate of

conformity. In addition, the CAP2000

program contains reduced in-use testing

requirements for small volume

manufacturers.

Exempting small volume

manufacturers from the Tier 2 and

interim HLDT phase-in requirements

eliminates a dilemma that phase-in

percentages can pose to a manufacturer

that has a limited product line, i.e., how

to address percentage phase-in

requirements if the manufacturer makes

vehicles in only one or two test groups.

We have implemented similar

provisions for small entities in other

rulemakings. Approximately 15–20

manufacturers that currently certify

vehicles, many of which are

independent commercial importers

(ICIs), will qualify. These manufacturers

represent just a fraction of one percent

of LDVs and LDTs produced. We do not

believe that this provision will have any

measurable impact on air quality.

1. Special Provisions for Independent

Commercial Importers (ICIs)

We requested comment in the NPRM

as to whether ICIs should be exempted

from the interim and Tier 2 fleet average

NOX standards. We explained that ICIs

may not be able to predict their sales

and control their fleet average emissions

because they may be dependent upon

vehicles brought to them by individuals

attempting to import uncertified

vehicles. We noted that the NLEV

program is optional for ICIs and that

ICIs are specifically prohibited, under

existing regulations, from complying

with the fleet average NMOG standard

under the NLEV program. (See 40 CFR

85.1515(c)). Also, the existing

regulations specifically bar ICIs from

participating in any emission related

averaging, banking or trading program.

(See 40 CFR 85.1515(d)). We expressed

our concern that if we do not amend

this provision, ICIs would likely just

pick the least stringent bin available to

certify their vehicles. This would create

an inequity for other manufacturers,

Federal Register / Vol. 65, No. 28 / Thursday, February 10, 2000 / Rules and Regulations 6795

especially other small volume

manufacturers that must comply with

the fleet average NOX standards.

Since we do not believe it is wise to

finalize a provision that could lead to an

inequity like this, and since averaging

may not be workable for ICIs, we are

finalizing that ICIs must comply with

the standards from the bin that contains

the relevant fleet average NOX standard,

e.g., in model years 2007 and later an

ICI would have to use bin 5 or below for

all of its LDV/LLDTs. However, if an ICI

is able to purchase credits or to certify

to bins below the one containing the

fleet average NOX standard, we will

permit the ICI to bank credits for future

use. Where an ICI desires to certify to

bins above the fleet average standard,

we will permit them to do so if they

have adequate and appropriate credits.

Where an ICI desires to certify to bins

above the fleet average standard and

does not have adequate or appropriate

credits to offset the vehicles, we will

permit the manufacturer to obtain a

certificate for vehicles using those bins,

but will condition the certificate such

that the manufacturer can only produce

vehicles if it first obtains credits from

other manufacturers or from other

vehicles certified to lower bins during

that model year.

We do not believe that ICIs can

predict or estimate their sales of various

vehicles well enough to participate in a

program that will allow them leeway to

produce some vehicles to higher bins

now, knowing that they will sell

vehicles from lower bins later. We also

do not believe that we can reasonably

assume that an ICI that certifies and

produces vehicles one year, will certify

or even be in business the next,

consequently, we are also not permitting

ICIs to utilize the deficit carryforward

provisions of the rule.

Essentially, ICIs will be allowed the

major benefits of the averaging, banking

and trading program, but will be

constrained from getting into a situation

where they can ever produce vehicles to

higher bins that they can not cover with

credits at the time they produce the

vehicles.

2. Hardship Provision for Small Volume

Manufacturers

The panel convened under the Small

Business Regulatory Enforcement

Fairness Act recommended that we seek

comment on the inclusion of a hardship

provision. We requested comment on

whether we should include such a

provision in the NPRM. Based upon

comment, we are including a limited

hardship provision in the final rule that

will be applicable to small volume

manufacturers.

Small volume manufacturers include

companies that independently import

motor vehicles (Independent

Commercial Importers or ICIs),

companies that modify vehicles to

operate on alternative fuels, companies

that produce specialty vehicles by

modifying vehicles produced by others,

and companies that produce small

quantities of their own vehicles, but rely

on major manufacturers for engines and

other vital emission related

components. In these businesses,

predicting sales is difficult and it is

often necessary to rely on others for

technology.

This provision will provide limited

relief in the case where a small volume

manufacturer is unable to comply with

the phase-in dates or average NOX

standard. The manufacturer will need to

provide evidence that, despite its best

efforts, it cannot meet implementation

dates or required NOX averages.

Appeals for hardship relief must be

made in writing, must be submitted

before the earliest date of

noncompliance, must include evidence

that the noncompliance will occur

despite the manufacturer’s best efforts to

comply and must include evidence that

severe economic hardship will be faced

by the company if the relief is not

granted. Hardship relief will only be

granted for the first year after a new

standard is finally implemented. For

small volume manufacturers, which are

already exempted from the phase-in

schedules for the interim and Tier 2

programs, this means that relief would

be available for the final phase-in year

for the LDV/LLDT Tier 2 phase-in

(2007), for the final phase-in year for the

interim HLDT phase-in (2007), and the

final phase-in year for the Tier 2 HLDT

phase-in (2009). Relief will also be

available for manufacturers that did not

opt into NLEV and must meet our

interim standards for all their LDV/

LLDTs in 2004, and relief will be

available for HLDTs and MDPVs which

must be brought under our interim

program in the 2004 model year.

We will work with the applicant to

ensure that all other remedies available

under this rule, e.g., use of banked or

purchased credits, are exhausted before

granting additional relief, and will limit

the period of relief to one year. Note that

in our discussion of the credit deficit

carryforward provision in section

IV.B.4.d.vi, we indicate that we are not

permitting small volume manufacturers

to carry deficits forward until they have

demonstrated compliance with the NOX

averaging provisions for one year. This

is to prevent small volume

manufacturers, that have already

received additional time due to the

waiver of the phase-in requirements,

from gaining even more time to finally

comply through the credit deficit

carryforward provisions.

To avoid this provision creating a selfimplementing problem, by which the

very existence of the hardship provision

prompts small volume manufacturers to

delay development, acquisition and

application of new technology, we want

to make clear that we expect this

provision to be rarely used. Our final

rule contains numerous flexibilities for

all manufacturers and it waives the

phase-in steps for small volume

manufacturers, which effectively

provides them more time. We expect

small manufacturers, to prepare for the

applicable implementation dates in

today’s rule.

I. Compliance Monitoring and

Enforcement

1. Application of EPA’s Compliance

Assurance Program, CAP2000

The CAP2000 program (64 FR 23905,

May 14, 1999) streamlines and

simplifies the procedures for

certification of new vehicles and will

also require manufacturers to test in-use

vehicles to monitor compliance with

emission standards. The CAP2000

program was developed jointly with the

State of California and involved

considerable input and support from

manufacturers. As the name implies, it

can be implemented as early as the 2000

model year.

We are finalizing our proposal that

the Tier 2 and the interim requirements

will be implemented subject to the

requirements of the CAP2000 program.

Certain CAP2000 requirements are being

slightly modified to reflect changes to

useful lives, standard structure and

other aspects of the Tier 2 program, but

we proposed no major changes to

fundamental principles of the CAP2000

program, and we are not adding any

major changes with today’s final rule.

Although we proposed changes to

useful lives, we did not propose to

amend the 50,000 mile minimum

mileage used in manufacturer in-use

verification testing or in-use

confirmatory testing under the CAP2000

program at this time. The CAP2000 inuse program is not yet implemented and

we believe it is appropriate to allow

manufacturers to gain experience with

procuring and testing vehicles at the

50,000 mile level before making

significant changes. However, where

one vehicle from each in-use test group

would have a minimum mileage of

75,000 miles under the CAP2000

program, we proposed and are

finalizing, consistent with California, to

6796 Federal Register / Vol. 65, No. 28 / Thursday, February 10, 2000 / Rules and Regulations

change that figure to 90,000 miles for

Tier 2 vehicles.

We may, in our own in-use program,

procure and test vehicles at mileages

higher than 50,000 and pursue remedial

actions (e.g., recalls) based on that data.

We may also use that data as the basis

to initiate a rulemaking to make changes

in the CAP2000 in-use requirements, if

the data indicate significant nonconformity at higher mileages.

We are finalizing certification test fuel

specifications consistent with our final

fuel sulfur requirements. Given the

phase-in for low sulfur fuel we are

finalizing in this rulemaking, we

recognize that 2004 to 2007 vehicles

(and vehicles certified in earlier model

years to bank early NOX credits) may be

exposed to higher sulfur levels early in

their lives. Because of this sulfur

exposure, these vehicles could

experience problems with OBD

indicator light illuminations.

Consistent with our approach under

the NLEV program, we will consider

requests from manufacturers to permit

OBD systems that function properly on

low sulfur fuel, but exhibit sulfurinduced passes when operated on

higher sulfur fuel. For OBD systems that

exhibit sulfur-induced indicator light

illumination, we will consider requests

to modify such vehicles on a case-bycase basis.

2. Compliance Monitoring

We plan no new compliance

monitoring activities or programs for

Tier 2 vehicles. These vehicles will be

subject to the certification and

manufacturer in-use testing provisions

of the CAP2000 rule. Also, we expect to

continue our own in-use testing

program for exhaust and evaporative

emissions. We will pursue remedial

actions when substantial numbers of

properly maintained and used vehicles

fail any standard in either in-use testing

program.

Consistent with our approach under

NLEV we will consider requests, prior

to manufacturer or EPA in-use testing to

permit preconditioning procedures

designed solely to remove the effects of

high sulfur gasoline on vehicles

produced through the 2007 model year.

We retain the right to conduct

Selective Enforcement Auditing of new

vehicles at manufacturer’s facilities. In

recent years, we have discontinued SEA

testing of new LDVs and LDTs, because

compliance rates were routinely at

100%. We recognize that the need for

SEA testing may be reduced by the low

mileage in-use testing requirements of

the CAP2000 program. However, we

expect to re-examine the need for SEA

testing as standards tighten under the

NLEV, interim, and Tier 2 programs.

We have established a data base to

record and track manufacturers’

compliance with NLEV requirements

including the corporate average NMOG

standards. We expect to monitor

manufacturers’ compliance with the

Tier 2 and interim corporate average

NOX standards in a similar fashion and

also to monitor manufacturers’ phase-in

percentages for Tier 2 vehicles.

3. Relaxed In-Use Standards for

Vehicles Produced During the Phase-in

Period

The Tier 2 standards will be

challenging for manufacturers to

achieve, and some vehicles will pose

more of a challenge than others. Not

only will manufacturers be responsible

for assuring that vehicles can meet the

standards at the time of certification,

they will also have to ensure that the

vehicles comply when self-tested in-use

under the provisions of the CAP2000

program, and when tested by EPA under

its in-use (‘‘Recall’’) test program.

With any new technology, or even

with new calibrations of existing

technology, there are risks of in-use

compliance problems that may not

appear in the certification process. Inuse compliance concerns may

discourage manufacturers from applying

new technologies or new calibrations.

Thus, we proposed and are finalizing,

relaxed in-use standards for those bins

most likely to require the greatest

applications of effort, to provide

assurance to the manufacturers that they

will not face recall if they exceed

standards by a specified amount.

For the first two years after a test

group meeting a new standard is

introduced, that test group will be

subject to more lenient in-use standards.

These ‘‘in-use standards’’ will apply

only to bin 5 and below, only for the

pollutants indicated, and only for the

first two model years that a test group

is certified under that bin. The in-use

standards will not be applicable to any

test group first certified to a new

standard after 2007 for LDV/LLDTs or

after 2009 for HLDTs.

The temporary in-use standards are

shown in Table V.A.–3 below.

TABLE V.A.–3.—IN-USE COMPLIANCE STANDARDS (G/MI)

[Certification standards shown for reference purposes]

Bin Durability period (miles) NOX

In-use

NOX

certification

NMOG

in-use NMOG certification

5 .. 50,000 0.05 n/a 0.075

5 .. 120,000 0.10 0.07 n/a 0.090

4 .. 120,000 0.06 0.04 n/a 0.070

3 .. 120,000 0.05 0.03 0.09 0.055

2 .. 120,000 0.03 0.02 0.02 0.010

Because we are concerned that diesel

vehicles may require low sulfur fuel to

comply with our interim requirements

and that such fuel may not be widely

available until the 2006–2007

timeframe, we are providing in-use

standards specifically for diesel vehicles

certified to bin 10 standards. These

standards will be determined by

multiplying the applicable NOX and PM

certification standards by factors of 1.2

and 1.35, respectively. These

multipliers can be used only for years

during which bin 10 is viable, only for

diesels and only for the pollutants

indicated.

We believe manufacturers should and

will strive to meet certification

standards for the full useful lives of the

vehicles, but we recognize that the

existence of such in-use standards poses

some risk that a manufacturer might aim

for the in-use standard in its design

efforts rather than the certification

standard, and thus market less durable

designs. We do not believe that risk to

be significant. We believe that such

risks are more than balanced by the

gains that can result from earlier

application of new technology or new

calibration techniques that might occur

in a scenario where in-use liability is

slightly reduced. Further, we believe

that the in-use standards will be of short

enough duration that any risks are

minimal.

Federal Register / Vol. 65, No. 28 / Thursday, February 10, 2000 / Rules and Regulations 6797

4. Enforcement of the Tier 2 and Interim

Corporate Average NOX Standards

We are finalizing, as proposed, that

manufacturers can either report that

they meet the relevant corporate average

NOX standard in their annual reports to

the Agency or they can show via the use

of NOX credits that they have offset any

exceedance of the corporate average

NOX standard. Manufacturers will also

have to report their NOX credit balances

or deficits.

The averaging, banking and trading

program will be enforced through the

certificate of conformity that the

manufacturer must obtain in order to

introduce any regulated vehicles into

commerce. The certificate for each test

group will require all vehicles to meet

the applicable Tier 2 emission standards

from the applicable bin of the Tier 2

program, and will be conditioned upon

the manufacturer meeting the corporate

average NOX standard within the

required time frame. If a manufacturer

fails to meet this condition, the vehicles

causing the corporate average NOX

exceedance will be considered to be not

covered by the certificate of conformity

for that engine family. A manufacturer

will be subject to penalties on an

individual vehicle basis for sale of

vehicles not covered by a certificate.

These provisions will also apply to the

interim corporate average standards.

As outlined in detail in the preamble

to the final NLEV rule, EPA will review

the manufacturer’s sales to designate the

vehicles that caused the exceedance of

the corporate average NOX standard. We

will designate as nonconforming those

vehicles in those test groups with the

highest certification emission values

first, continuing until a number of

vehicles equal to the calculated number

of noncomplying vehicles as determined

above is reached. In a test group where

only a portion of vehicles are deemed

nonconforming, we will determine the

actual nonconforming vehicles by

counting backwards from the last

vehicle produced in that test group.

Manufacturers will be liable for

penalties for each vehicle sold that is

not covered by a certificate.

During phase in years, the certificates

will also require manufacturers to meet

the applicable phase-in requirements.

Compliance with the phase-in

requirements will be enforced in the

same manner as for the corporate

average NOX standard. For the optional

phase-in requirement for HLDTs for

model year 2004, manufacturers must

declare in their application for

certification whether they intend to

comply with the interim requirements

for all of their HLDTs and initiate phasein to the interim corporate average NOX

standard in 2004 and receive the

benefits of that phase-in (less stringent

NMOG standards for certain LDT2s and

LDT4s). Compliance with this phase-in

requirement and the fleet average NOX

standard will be enforced just like

compliance with any other average NOX

standard and phase-in requirement of

today’s program.

We will also condition certificates to

enforce the requirements that

manufacturers not sell NOX credits that

they have not generated. A

manufacturer that transfers NOX credits

it does not have will create an

equivalent number of debits that it must

offset by the reporting deadline for the

same model year. Failure to cover these

debits with NOX credits by the reporting

deadline will be a violation of the

conditions under which EPA issued the

certificate of conformity, and

nonconforming vehicles will not be

covered by the certificate. EPA will

identify the nonconforming vehicles in

the same manner described above.

In the case of a trade that results in

a negative credit balance that a

manufacturer could not cover by the

reporting deadline for the model year in

which the trade occurred, we proposed,

and are finalizing, to hold both the

buyer and the seller liable. This is

consistent with other mobile source

rules, except for the NLEV rule as

discussed below. We believe that

holding both parties liable will induce

the buyer to exercise diligence in

assuring that the seller has or will be

able to generate appropriate credits and

will help to ensure that inappropriate

trades do not occur.

In the NLEV program we

implemented a system in which only

the seller of credits would be liable. In

the preamble to the final NLEV rule (See

62 FR 31216), we explained that a

multiple liability approach would be

unnecessary in the context of the NLEV

program given that the main benefit to

a multiparty liability approach would be

to ‘‘protect against a situation where one

party sells invalid credits and then goes

bankrupt, leaving no one liable for

either penalties or compensation for the

environmental harm.’’ Our preamble

stated further that EPA would not

necessarily take the same approach for

‘‘other differently situated trading

programs.’’

The NLEV program was implemented

to be a relatively short duration

program, during which time we could

expect relative stability in the industry.

Also, given that NLEV is a voluntary

program of lower than mandated

standards, we did not expect that the

smallest manufacturers would opt in.

These are the companies whose stability

is most in jeopardy in a dynamic and

very competitive worldwide business.

We currently believe that the Tier 2

program and its framework will remain

for many years. We note that the

program is not scheduled for complete

phase-in for almost nine years after the

publication of today’s rule. All

manufacturers, large and small, will

ultimately have to meet the Tier 2

standards. We cannot predict that in the

Tier 2 timeframe there will not be

companies that leave the market or are

divided between other companies in

mergers and acquisitions. Thus we

believe it is prudent to implement a

program to provide inducements to the

seller to assure the validity of any

credits that it purchases or contracts for.

J. Addressing Environmentally

Beneficial Technologies Not Recognized

by Test Procedures

Compliance with the current and

proposed EPA motor vehicle emission

standards is based on the emission

performance of a vehicle over EPA’s

prescribed test procedure. While this

test procedure addresses many of the

aspects of a vehicle’s impact on air

quality, it does not address all such

impacts. EPA is aware of two

developing technologies which have

potential to improve ozone-related air

quality, but that would not do so over

the current EPA test procedure.

The first example is a device that

removes ozone from the air as the

vehicle is driven. A major producer of

automotive catalysts, Englehard, has

developed a catalytic coating for vehicle

radiators (called PremAir) that converts

ambient ozone to oxygen. ARB has been

working with Englehard for some time

to develop a procedure which would

grant PremAir and other direct ozone

reducing technologies a NMOG credit

under its LEV I and LEV II programs.

ARB issued on December 20, 1999 a

Manufacturers Advisory Circular

outlining procedures for establishing

such a NMOG credit.

Englehard submitted substantial

comments to the Tier 2 NPRM,

including ozone modeling results for

five cities (Los Angeles, Houston,

Atlanta, New York City, and Chicago).

This ozone modeling compared the

ozone reductions from reduced exhaust

VOC and NOX emissions to that from

using PremAir. As a result of this

modeling, Englehard requested that EPA

grant a typical PremAir system a NMOG

or NOX emission credit of 0.015 g/mi.

This credit would be adjusted based the

exact design and performance of the

system and vehicle being certified.

6798 Federal Register / Vol. 65, No. 28 / Thursday, February 10, 2000 / Rules and Regulations

The second example is an insulated

catalyst. The insulation retains heat for

extended periods of time, increasing the

catalyst temperature when the engine is

started and reducing the time required

for the catalyst to reach an operational

temperature. This technology can

reduce cold start emissions for engine

off times (called soaks) of 24 hours or

less. The vast majority of engine soaks

in-use are less than 24 hours. However,

EPA’s test procedure only tests

emissions at two fairly extreme soak

times: 10 minutes and 12–36 hours. The

10 minute soak is so short that even an

uninsulated catalyst is warm enough to

quickly begin working upon restart. The

36 hour soak is beyond the practical

limit of cost-effective insulating

techniques. As a result of the Tier 2

NPRM, EPA received a number of

inquiries from potential manufacturers

of insulated catalysts, requesting further

information about emission credits, test

procedures and certification

requirements.

EPA believes that both of these

technologies, as well as other potential

technologies, will reduce regulated

emissions and/or ambient ozone levels,

as long as they operate as designed inuse. EPA will work with the developers

of such technologies to establish

regulatory procedures to determine

whether it is appropriate to grant

emission credit for particular

technologies. This process will involve

the opportunity for public notice and

comment.

With regard to Englehard’s PremAir

technology, EPA specifically requested

comments on ARB’s proposed approach

to determining an NMOG credit and

received no adverse comment on

granting this type of technology a VOC

emission credit. Thus, EPA is

promulgating today procedures very

similar to ARB’s for certifying such

technologies and determining the

appropriate VOC emission credit. The

only difference between EPA’s and

ARB’s procedures involve assessing the

effectiveness of VOC emission

reductions and ozone reducing devices

in areas outside of California.

In summary, the ozone reductions

associated by both the ozone reducing

technology, such as PremAir, and

exhaust VOC emission reductions will

be estimated using urban airshed

modeling, using up-to-date chemical

and meteorological simulation

techniques. Four local areas shall be

modeled: New York City, Chicago,

Atlanta and Houston. The ozone

episodes to be modeled shall be those

selected by the states for use in their

most recent ozone SIPs. Emissions shall

be projected for calendar year 2007.

Baseline emissions will include the

benefits of the Tier 2 and sulfur

standards being promulgated today, as

well as all other emission controls

assumed in EPA’s ozone modeling of

the benefits of the Tier 2 and sulfur

standards described above. The ozone

benefit of VOC emission reductions will

be modeled by assuming that Tier 2

LDVs and LDTs meet a 0.055 g/mi

exhaust NMOG standard instead of a

0.09 g/mi NMOG standard. The

relationship between changes in exhaust

NMOG emission standards and in-use

VOC emissions shall be determined by

modeling LDV+LDT emission in 2030

assuming that all Tier 2 vehicles meet

a 0.055 g/mi exhaust NMOG standard

instead of a 0.09 g/mi NMOG standard.

All emission modeling shall utilize the

updated Tier 2 emission model

developed by EPA as part of this rule,

or MOBILE6, once it is available. The

measure of ozone to be used in

calculating VOC emission equivalency

will be the peak one-hour ozone level

anywhere in the modeled region on the

day when ozone is at its highest. The

NMOG credit will be determined by

averaging the NMOG credit determined

in each of the four local areas.

Simulation of the benefits of the

direct ozone reducing device will

assume that ozone levels immediately

around the roadway will be 40% less

than that existing in the broader grid.

The performance aspects of the direct

ozone reducing device can be simulated

by any reasonable values, since the

appropriate NMOG credit for any

specific application of this technology

will be scaled to the performance of the

specific application.

The manufacturer wishing to obtain

an NMOG credit for use of this

technology must demonstrate its

effectiveness to EPA as part of the

certification process. This will involve

demonstrating the air flow through the

device, its ozone destruction capability

under conditions analogous to those

photochemically modeled, the

durability of this capability over the

useful life of the vehicle and the method

to be used to diagnose its effectiveness

in-use.

Regarding the insulated catalyst

technology, less information has been

received to date on its performance. We

are not promulgating regulations for

determining the appropriate credit for

such technology today. However, when

we were developing our SFTP

standards, EPA developed a

methodology to assess the emission

benefits of insulated catalysts or other

techniques which reduced emissions

after the vehicle soaks between 10

minutes and 12–36 hours. Thus, EPA

expects to use this methodology as a

starting point in assessing the benefit of

insulated catalysts and will continue to

assess development of options in this

area. Because an insulated catalyst

operates essentially like a typical

catalyst, we do not expect that the test

procedures for its certification would

differ from those applicable to typical

Tier 2 vehicles. The primary difference

will be an assessment of its effectiveness

relative to conventional catalyst

technology over a range of vehicle soak

times between 10 minutes and 36 hours.

Then, it will be necessary to estimate

the average effectiveness in-use relative

to conventional technology using the inuse frequency of vehicle soak times.

K. Adverse Effects of System Leaks

The standards set forth in today’s

final rule are very stringent. They

require extremely tight control of air/

fuel ratios and also tight control of the

inputs to the catalyst(s). A sealed

exhaust system is crucial to the proper

operation and emission control of

current vehicles and even more so to the

expected Tier 2 vehicles. Because a

given point in the exhaust system

intermittently sees negative pressure,

exhaust leaks can permit air to enter the

exhaust system. Even tiny amounts of

air entering this way can have large

impacts on the output of the oxygen

sensor. If the output of the oxygen

sensor is affected, then the exhaust

output of the cylinders will be affected.

Consequently, an exhaust leak can lead

to both excess NOX and NMOG

emissions. Air entering through exhaust

leaks can also impact the NOX

conversion efficiency of catalysts.

In the preamble to the NPRM, we

expressed our concerns about the

impact of small exhaust leaks and

requested comment on design or onboard monitoring measures we could

finalize to ensure that exhaust systems

were manufactured and installed in

such a way that leaks are prevented. We

also asked for comment on whether we

should implement a provision that

would require manufacturers to

demonstrate through engineering

analysis or design that the possibilities

of exhaust leaks have been addressed.

Manufacturers indicated in their

comments that they believe addressing

exhaust leaks is unnecessary. We

believe otherwise. Data we have seen

suggest that very large emission effects

can occur due to very small leaks.

Consequently, we are finalizing a

provision in today’s rule that will

require, as part of the certification

process, for manufacturers to indicate

that they have conducted an engineering

analysis of the exhaust system. This

Federal Register / Vol. 65, No. 28 / Thursday, February 10, 2000 / Rules and Regulations 6799

125 40 CFR Part 80, subpart F.

analysis must cover the entire exhaust

system, including air injection systems,

from the engine block exhaust manifold

gasket surface to a point beyond the last

catalyst or oxygen sensor. This analysis

must determine whether the exhaust

system has been designed to facilitate

leak-free assembly, installation, repair

and operation for the full useful life of

the vehicle.

With regard to the concept of

‘‘facilitating leak-free repair’’, we intend

that manufacturers should ascertain that

the exhaust system can be removed in

a dealership or repair shop for repairs to

the exhaust system itself or to other

components of the vehicle and be able

to be reassembled and reinstalled in a

leak free manner using commonly

available tools. It is not our intention

that the concept of ‘‘facilitating leak-free

repair’’ apply to situations of gross

misuse, tampering or serious vehicle

damage.

L. The Future Development of Advanced

Technology and the Role of Fuels

The EPA staff will continue to assess

the emission control potential of

vehicles powered by technologies such

as lean-burn and/or fuel-efficient

technologies, including diesel engines

equipped with advanced aftertreatment

systems, gasoline direct injection

engines, and other technologies that

show promise for significant advances

in fuel economy and meeting the Tier 2

standards in the post-2004 time frame.

In this assessment, we will maintain a

‘‘systems’’ perspective, considering the

progress of advanced vehicle

technologies in the context of the role

that sulfur in fuels plays in enabling the

introduction of these advanced

technologies or maximizing their

effectiveness.

M. Miscellaneous Provisions

We are finalizing, as proposed, to

continue existing emission standards

from Tier 1 and NLEV that apply to cold

CO, certification short testing, refueling,

running loss, and highway NOX. We are

discontinuing, as proposed, the 50

degree (F) standards and testing

included in the NLEV program. The 50

degree standards are a part of the NLEV

program because that national program

adopted California requirements

virtually in their entirety. These

standards had not previously been part

of any federal program. We are also

discontinuing idle CO standards for

LDTs, based upon comment. These

standards are adequately covered by the

certification short test standards.

VI. Gasoline Sulfur Program

Compliance and Enforcement

Provisions

A. Overview

The gasoline sulfur program

promulgated today has many of the

same features as the reformulated

gasoline/conventional gasoline (RFG/

CG) program, including refinery

averaging, refinery and downstream

level caps, and the generation and use

of credits. These features raise similar

compliance issues for both programs. As

a result, the enforcement mechanisms of

the gasoline sulfur rule generally track

those of the RFG/CG rule, where

applicable. Because low sulfur gasoline

is necessary to avoid significant

impairment of Tier 2 motor vehicle

emissions technology, we believe

measures are needed to assure that

gasoline meets the standards

promulgated in today’s rule at the time

the gasoline leaves the refinery gate or

is imported, and to assure that the

quality of the gasoline is maintained

downstream of the refinery.

More specifically, today’s rule

includes the following provisions:

• Refiners and importers must test

each batch of gasoline produced or

imported for sulfur content and

maintain testing records and retain test

samples;

• Refiners and importers must submit

reports regarding compliance with the

average standards and credit provisions;

• Attest procedures 125 similar to

those of the RFG/CG rule will be

applied to the sulfur standards and

credit provisions;

• Refiners and importers are

prohibited from using, selling or

purchasing invalid sulfur credits, and

are required to adjust compliance

calculations if invalid credits have been

used, sold or purchased;

• Small foreign refiners subject to the

small refiner standards described in

section IV.C. above must comply with

the rule’s small refiner compliance

requirements and other requirements to

ensure the separation of such foreign

gasoline from all other gasoline to the

U.S. port of entry; any foreign refiners

participating in the early credit

generation program must also meet

certain provisions concerning credit

generation, including reporting and

recordkeeping;

• All regulated parties in the gasoline

distribution system who are

downstream from the refiner or importer

must comply with downstream sulfur

cap standards;

• Regulated parties are subject to

presumptive liability for violations at a

party’s own facility and for violations at

other facilities that could have been

caused by the regulated party; branded

refiners are subject to liability for

violations occurring at branded

facilities.

• Refiners and distributors may

implement downstream quality

assurance testing to assure compliance

and to establish an element of defense

against presumptive liability.

As in other fuels programs, the sulfur

standards apply to all motor vehicle fuel

that meets the definition of gasoline,

except for aviation fuel and racing

gasoline, as was proposed in the NPRM.

See 40 CFR 80.2(c). Gasoline sulfur

standards apply, however, to gasoline

that is ultimately used in nonroad

equipment or marine engines.

As we noted in the NPRM, we are

aware there are certain fuels, such as

aviation fuel and racing fuel, that are

generally segregated from gasoline

throughout the distribution system.

Where such fuels are segregated from

motor vehicle gasoline and not made

available for use in motor vehicles, the

fuel is not subject to sulfur rule

standards. However, if such fuels are

not segregated throughout the

distribution system, but are used as

motor vehicle gasoline or are

commingled with motor vehicle

gasoline, then any person who

introduces such fuels into the gasoline

distribution system is a refiner, subject

to all the refiner requirements of today’s

regulations, including registration,

reporting, testing and meeting the

national refiner average and cap

standards for the volume of gasoline

that person added to the distribution

system. Today’s rule adopts the

provisions concerning fuel used for

racing vehicles as proposed.

One commenter suggested that racing

gasoline or aviation gas should be

allowed to be used as motor vehicle

gasoline by downstream parties so long

as the racing gasoline or aviation gas

does not exceed the applicable

downstream cap standard. We disagree.

Racing gas that meets the applicable

downstream sulfur cap would

nevertheless not be subject to the

refinery gate cap or averaging standards,

and may not meet such standards.

Allowing such fuels to be distributed for

motor vehicle use would thus

circumvent the intent of the rule.

The rule promulgated today clarifies

the definition of ‘‘refinery’’ at 40 CFR

80.2(h), as was proposed in the NPRM.

We received no comments on this

clarifying change. Specifically, section

80.2(h) now provides that ‘‘refinery’’

6800 Federal Register / Vol. 65, No. 28 / Thursday, February 10, 2000 / Rules and Regulations

126The term ‘‘oxygenate blenders’’ includes

‘‘ethanol elnders.’’

127Reformulated Gasoline and Anti-dumping

Questions and Answers, (11/12/96); Proposed Rule

for Modifications to Standards and Requirements

for Reformulated and Conventional Gasoline; 62 FR

37337 et seq. (July 11, 1997).

128 62 FR 37337 et seq. (July 11, 1997) (proposed

40 CFR 80.84).

means any facility, including a plant,

tanker truck or vessel where gasoline or

diesel fuel is produced, including any

facility at which blendstocks are

combined to produce gasoline or diesel

fuel, or at which blendstock is added to

gasoline or diesel fuel. This is consistent

with all current EPA fuels rules,

interpretations, policies and question

and answer documents.

Oxygenate Blenders

In the NPRM we proposed that

oxygenate blenders 126 would not be

subject to the refiner sulfur standard

like other blenders, because we felt it

unlikely that oxygenates will have

sulfur levels that will raise the sulfur

content of the gasoline. This approach

also was proposed because gasoline is

the denaturant normally used to

produce denatured ethanol. However,

we received comments that denatured

ethanol may contain as much as 50 ppm

sulfur, which could result in significant

increases in sulfur content from ethanol

blending alone.

While it is true that some of today’s

gasoline has a sulfur content as high as

1,000 ppm which if used as an ethanol

denaturant results in ethanol having a

sulfur content of 50 ppm, the average

sulfur content of gasoline is about 300

ppm which if used as an ethanol

denaturant results in ethanol with a

sulfur content of 15 ppm. In addition,

when the gasoline sulfur standards

being promulgated today are in effect,

the average sulfur levels of gasoline will

be significantly reduced, which will

further reduce the sulfur content of

denatured ethanol to very low levels.

For this reason, we are finalizing the

regulation as proposed that oxygenate

blenders are not subject to refiner sulfur

standards.

However, if gasoline blendstock

instead of finished gasoline is used as a

denaturant for ethanol the oxygenate

blender who adds the ethanol would

become a ‘‘refiner,’’ who is required to

demonstrate compliance with the sulfur

standards for the denatured ethanol

added to gasoline. This is because the

oxygenate blender would be adding a

blendstock along with the ethanol,

which subjects the blendstock blender

to refiner standards and requirements.

Moreover, if the blendstock has a high

sulfur content the denatured ethanol

could have a sulfur content greater than

30 ppm, or even greater than 80 ppm,

which could make compliance by such

a ‘‘refiner’’ difficult or impossible. In

addition, as discussed above, in certain

cases ethanol is included in the refinery

compliance calculations of the refiner

who produced the gasoline or RBOB

with which the ethanol is blended.

Refiners assume this ethanol has no

sulfur content, an assumption that could

be incorrect if high sulfur blendstock is

used as the denaturant.

For these reasons we believe it is

important that ethanol blenders use

denatured ethanol with a sulfur content

of 30 ppm or less, which would occur

if the current practice of using finished

gasoline as ethanol denaturant

continues. In order to ensure this result,

the regulations include a provision that

prohibits ethanol blenders from using

denatured ethanol with a sulfur content

greater than 30 ppm. We believe ethanol

blenders can comply with this

requirement through commercial

arrangements with their ethanol

suppliers, that specify the maximum

sulfur content of denatured ethanol. In

addition, ethanol blenders can assure

compliance with this requirement by

testing to determine the sulfur content

of denatured ethanol received.

Gasoline Treated as Blendstock (GTAB)

One commenter suggested that the

Agency policy under the RFG/CG rule

that allows certain imported gasoline to

be treated as a blendstock by importerrefiners should be applied to today’s

rule. The GTAB policy was originally

issued in the RFG Question and Answer

document, and was subsequently

published as part of a proposed RFG

rulemaking in 1997.127 We intend to

address GTAB issues in that RFG

rulemaking, including issues regarding

compliance with today’s rule.

Transmix

We are aware that when gasoline

meeting the requirements finalized in

today’s rule is transported through

pipelines, there will be some situations

where adjacent distillate product in the

pipeline will mix with a portion of the

gasoline to create an interface product,

commonly referred to as transmix. This

transmix may not be blended into the

diesel fuel because the gasoline in the

transmix may result in diesel fuel

performance problems. Historically, this

type of transmix product has either been

blended into the gasoline, in limited

concentrations, or the transmix has been

separated into its gasoline and distillate

components at a reprocessing plant.

However, the practice of blending the

transmix into gasoline may result in

violations of the downstream standards

for RFG, and such blending could

violate the downstream sulfur caps

finalized in today’s rule, because many

distillates have a very high sulfur

content. Therefore, we believe

regulatory provisions are needed to

resolve these issues. We have not

addressed transmix issues in today’s

rule because we have already proposed

regulations regarding transmix blending

and processing in another

rulemaking.128 We plan to address

transmix issues, including issues

regarding compliance with today’s rule,

in that rulemaking, which we plan to

finalize in the near future.

Inability To Produce Conforming

Gasoline in Extraordinary

Circumstances

Several commenters suggested the

rule should include a provision, similar

to the RFG rule provision at 40 CFR

80.73, to address situations where, due

to extraordinary circumstances, a refiner

or importer cannot produce or distribute

conforming gasoline. Section 80.73

applies to refiners, importers and

oxygenate blenders. Today’s rule has

adopted the provisions of section 80.73

for RFG and CG, for importers and

refiners, but not for oxygenate blenders.

This is because the gasoline sulfur

program does not include provisions

that would be expected to require

oxygenate blender relief.

In the remainder of this section we

discuss enforcement issues regarding

today’s rule that are not covered in this

Overview or in section IV.C., above.

B. Requirements for Foreign Refiners

and Importers

In the NPRM we proposed that

standards for gasoline produced by

foreign refineries that are not subject to

small refiner individual refinery

standards would be met by the importer.

Standards for gasoline produced by a

foreign refinery subject to an individual

sulfur rule standard would be met by

the foreign refinery, with certain limited

exceptions as provided in the foreign

refinery provisions. The rule

promulgated today adopts the

provisions as proposed, except for

several changes aimed at clarifying the

proposed requirements, changes relating

to the temporary relief provision, and

changes relating to foreign refiners’

participation in the early credit

program. These provisions are very

similar to the foreign refinery provisions

of the RFG/CG rule.

Federal Register / Vol. 65, No. 28 / Thursday, February 10, 2000 / Rules and Regulations 6801

129 40 CFR 80.94.

130Small refiner and temporary refiner hardship

individual refinery standards sunset January 1,

2008, except for any small refineries that receive a

hardship extension not to exceed two years.

1. Requirements for Foreign Refiners

With Individual Refinery Sulfur

Standards or Credit Generation

Baselines

Under the RFG/CG rule, EPA

promulgated regulations 129 addressing

the establishment and implementation

of individual baselines for CG produced

by certain foreign refiners. The purpose

of these regulations is to ensure the

compliance of gasoline supplied from

foreign refineries with individual

compliance baselines. It includes

comprehensive controls, requirements

and enforcement mechanisms to

monitor the movement of gasoline from

the foreign refinery to the U.S., to

monitor gasoline quality and to provide

for enforcement as necessary.

In the NPRM, we proposed similar

requirements for compliance with the

applicable sulfur standards that would

apply to any foreign refiner who

demonstrates that it meets the sulfur

program’s small refiner criteria. We

proposed that foreign refinery baselines

would be based on annual average

sulfur levels and the volume of gasoline

imported to the U.S. during the same

baseline period as would be applicable

to domestic small refiners. In today’s

final rule we have also adopted

provisions for foreign refiners to

establish baselines to participate in the

early credit generation program, and to

request temporary relief. Any foreign

refiner who obtains a foreign refinery

gasoline sulfur baseline would be

subject to the same requirements as

domestic refiners with individual

refinery baselines under today’s rule.

Additionally, provisions similar to the

provisions at 40 CFR 80.94 would

apply, which include:

• Segregating gasoline produced at

the small refinery until it reaches the

U.S.;

• Refinery registration;

• Controls on product designation;

• Load port and port of entry testing;

• Attest requirements; and

• Requirements regarding bonds and

sovereign immunity.

The rationale for these enforcement

provisions is discussed more fully in the

Agency’s preamble to the final RFG/CG

foreign refineries rule (62 FR 45533

(Aug. 28, 1997)).

Several commenters suggested that

the rule should have even stronger

enforcement provisions concerning

foreign refiners, including criminal

provisions against foreign individuals

who violate the requirements of the

rule. While we agree that the rule’s

enforcement provisions pertaining to

foreign refiners must be effective, we

believe the proposed enforcement

provisions are sufficient, and that

attempts to further strengthen them

would not significantly increase their

overall effectiveness. Today’s rule

imposes various requirements on

foreign refiners not required of domestic

refiners, as noted above, which we

believe are more effective for ensuring

environmental compliance than

criminal provisions would be for foreign

individuals, in light of the potential

difficulties of enforcing sanctions

against foreign individuals. EPA’s

experience to date with the similar RFG/

CG requirements under section 80.94 of

the RFG/CG rule does not indicate the

provisions are inadequate.

Therefore, today’s rule generally

retains these provisions as proposed.

The final rule makes several technical

changes, including changes regarding

baselines for foreign refiners, to be

consistent with the requirements for

domestic small refiners and refiners

generating early credits finalized in

today’s rule. The rule’s foreign refiner

enforcement provisions now also apply

to foreign refiners participating in the

early credits program, and to the use of

credits by foreign small refiners.

One commenter stated that the

language of the proposed § 80.410(n)

would be too broad in that prohibiting

any ‘‘person’’ from combining certified

small foreign refiner gasoline with noncertified small foreign refiner gasoline

or with certified small foreign refinery

gasoline produced at a different refinery

would prohibit even retail level

commingling of such products. This was

not intended and today’s rule clarifies

that such commingling can occur

subsequent to importation.

Under the proposal, when the small

refiner standards sunset (and

additionally under today’s rule, when

the temporary refiner relief provisions

sunset),130 all gasoline would be subject

to a single national averaged standard

and one national refinery level cap.

Thereafter, standards for all imported

gasoline would be met by U.S.

importers. We have retained this

provision as proposed. With a single

national average standard and cap

standard, gasoline sulfur content can

most readily be monitored at the U.S.

importer level, since there will no

longer be a special class of gasoline with

different standards that would need to

be monitored.

2. Requirements for Truck Importers

Today’s final rule adopts the

proposed requirement for importers to

sample and test each batch of gasoline

imported. However, as noted in the

preamble to the NPRM, for parties that

import gasoline into the U.S. by truck,

the every-batch testing requirement

would include testing the gasoline in

each truck compartment, or if the

gasoline is homogeneous, testing the

gasoline in the truck.

In the NPRM we recognized that this

every-batch testing requirement may not

be feasible for truckers hauling many

small loads of gasoline, and we

therefore proposed a limited alternative

approach for truck importers in lieu of

every-batch testing. The proposed

alternative approach is based on the

importer meeting the 30 ppm sulfur

standard on a per-gallon basis. Under

this alternative approach, the importer

would be allowed to rely on the sulfur

results based on sampling and testing

conducted by the operator of the foreign

truck loading terminal. Because, in most

cases, the terminal operator will not be

subject to United States laws, we also

proposed safeguards intended to ensure

that the gasoline in fact meets the

applicable standard. This includes the

requirement that the importer conduct a

quality assurance sampling and testing

program independent from the sampling

and testing conducted by the terminal.

Under this approach the reporting

requirements would be minimized since

no averaging would be required. The

environmental consequences of this

approach would be neutral, because by

meeting the 30 ppm sulfur standard on

an every-gallon basis the standard also

would be met on average.

One commenter stated that the 30

ppm per-gallon standard would be

difficult for truck importers to meet due

to the fact that Canadian terminals may

not always have gasoline with a sulfur

content no greater than 30 ppm. The

commenter suggested that truck

importers be allowed to rely on testing

conducted by the foreign gasoline

terminal, as discussed above, to meet

the average and cap standards like other

importers.

We agree that truck importers may

have difficulty obtaining gasoline that

meets the 30 ppm sulfur standard on a

per-gallon basis. Under Canadian

regulations, Canadian refiners will be

subject to a 150 ppm average standard

and a 300 ppm cap in 2004, and in 2005

Canadian refiners will be subject to a 30

ppm average standard and an 80 ppm

6802 Federal Register / Vol. 65, No. 28 / Thursday, February 10, 2000 / Rules and Regulations

131 Vol. 133 23/6/99 C. Gaz. II, 23 June 99 (pp.

1469 et seq.)

132 In 2004, a 120 ppm cap; In 2005 and beyond,

a 30 ppm cap. See Table IV.C.–1.

133 In 2004, a 120 ppm average standard and a 300

ppm cap; In 2005, a 30 ppm average standard, a

corporate pool average no greater than 90 ppm, and

a 300 ppm cap; In 2006 and beyond, a 30 ppm

average standard and a 80 ppm cap. See Table

IV.C.–1.

cap.131 This means that truck importers

should be able to meet the standards

applicable to other importers, including

the ultimate average standard and cap

standard under today’s rule (30 ppm

average and 80 ppm cap), without great

difficulty. However, meeting a pergallon cap of 30 ppm might be difficult

since the sulfur content of gasoline in

the storage tanks of Canadian terminals,

like those of U.S. terminals, will likely

exceed 30 ppm at times, even after the

30/80 standards are implemented. We

have concluded that we can address this

concern by providing additional

flexibility to truck importers, and still

assure compliance.

While today’s rule retains the

proposed alternative, with some

modifications, it also provides a second

alternative approach. Under this second

approach, truckers are allowed to meet

the national average and cap applicable

to other importers, and rely on testing

conducted by the foreign gasoline

terminal so long as all the other

requirements applicable to the proposed

alternative approach are complied with.

In addition, truckers using this second

alternative approach will be subject to

more extensive reporting than required

for the proposed alternative, since the

importer will have to demonstrate

compliance with the annual average

sulfur standard applicable to other

importers.

One commenter urged that truckers

should be subject only to the national

downstream cap. We cannot agree to

this approach as it is not

environmentally neutral relative to the

national standards in effect for other

importers and refiners. If truck

importers were required to meet only

the downstream cap, sulfur levels for

their imported gasoline could be

substantially higher than for other

importers, which could have a

detrimental environmental

consequence.

One commenter stated that the 30

ppm per-gallon standard for truck

importers should not go into effect until

the 30 ppm standard becomes the

national average standard for refineries

and other importers. We agree. Under

today’s rule, the per-gallon standards

applicable to truck importers under the

proposed alternative will be the same

sulfur level as the sulfur average

standard that applies to other importers

(in 2004 there is no average standard;

however, truck importers using this

alternative compliance approach must

meet the corporate pool standard on a

per-gallon basis).132 Under the second

alternative approach, the truck importer

will be subject to the same average

standard and cap standard applicable to

other importers.133

Similar provisions as provided above

apply to truck importers for gasoline

subject to the geographic phase-in area

(GPA) standards (see section IV.C. of

this preamble for a discussion of GPA

standards). However, because of the

small volumes of truck-imported

gasoline, and the consequent difficulty

in meeting corporate pool averages for a

trucker who imports gasoline into both

the GPA and areas outside the GPA,

today’s rule requires that for truck

importers using the averaging option,

the corporate pool average does not

have to be met. The 150 ppm average

standard and the 300 ppm cap standard

apply to gasoline imported by truck into

the GPA in 2004 through 2006. For

truck importers meeting the per-gallon

standard option for gasoline imported

into the GPA, the per-gallon standards

are 150 ppm for 2004 through 2006.

Truck Import of Foreign Small Refiner

Gasoline

The NPRM addressed issues

associated with gasoline produced by a

foreign small refinery with an

individual baseline and certified as

subject to the refinery’s individual

interim standard (S–FRGAS), and

imported by truck. The proposed

requirements for S–FRGAS included

segregating the gasoline from all other

gasoline from the refinery gate to the

U.S., so that compliance with standards

can be tracked. For ordinary, non-truck

importers, each batch of certified S–

FRGAS must be tested at the load port

and port of entry. Today’s rule finalizes

these proposed requirements for S–

FRGAS.

However, in the case of gasoline

imported by truck, the NPRM

acknowledged that the testing and other

procedures proposed for certified S–

FRGAS may not be feasible. As a result,

we proposed an alternative to the

requirement for testing every truckload

of imported certified S–FRGAS, and to

other importer requirements. This

alternative approach includes a

requirement that small foreign refiners

producing any S–FRGAS that will be

imported by truck submit a petition to

EPA that includes a plan which is

designed to ensure that certified S–

FRGAS remains segregated from all

other gasoline from the refinery to the

U.S. Rather than specifying the precise

requirements of such a plan in the

regulations, we proposed to allow the

refiner to develop its own procedures

for ensuring that S–FRGAS remains

segregated. However, the plan must

contain certain elements, such as

product transfer documents which

identify the origin of the gasoline and

prohibit its commingling with any

product other than certified S–FRGAS

from that refinery.

This approach also requires the

refiner of such truck-imported gasoline

to receive and maintain all such product

shipment documents, including U.S.

import documents, for five years and

review these to ensure that segregation

is maintained until reaching the U.S. To

ensure that refiners conduct this review,

we proposed to require the refiner’s

plan to include attest audit procedures

to be conducted annually by an

independent third party.

We received no comments on this

proposal for ensuring the integrity of S–

FRGAS imported by truck. Today’s final

rule adopts the petitioning provision to

permit alternative segregation

procedures for S–FRGAS imported by

truck as proposed since we continue to

believe that it will provide flexibility to

foreign refiners and to importers and

will adequately assure enforceability.

C. What Standards and Requirements

Apply Downstream?

We proposed per-gallon cap standards

that would apply to all parties in the

distribution system downstream of the

refinery and importer level, including

pipelines, terminals, oxygenate

blenders, distributors, carriers, retailers

and wholesale purchaser-consumers.

We believe that downstream cap

standards and compliance monitoring

based on downstream standards are

needed to ensure that the sulfur level of

gasoline remains below the cap level

when dispensed for use in motor

vehicles, to avoid adverse emissions

consequences that would be caused by

the use of gasoline having a sulfur

content above the cap level. The

following discussion addresses

downstream standards generally,

downstream standards and

requirements for gasoline produced by

refineries subject to standards under

§ 80.240 and 80.270, and downstream

standards and requirements for gasoline

produced or imported for the geographic

phase-in area (GPA).

Federal Register / Vol. 65, No. 28 / Thursday, February 10, 2000 / Rules and Regulations 6803

134ASTM standard method D 2622–98, entitled

‘Standard Test Method for Sulfur in Petroleum

Products by Wavelength Dispersive X-ray

Fluorescence Spectrometry.’’

Determination of Downstream Cap

Standards

We proposed that the downstream

standards would be more lenient than

the refinery-level cap standards so that

refiners and importers can produce

gasoline that equals the refinery-level

cap standard. We did so because it has

been EPA’s experience that if a refiner

produces gasoline that equals, or almost

equals a standard, that gasoline may be

shown to violate the standard when

subsequently tested at a location

downstream of the refinery due to

testing variability. As a result, parties

downstream of the refinery (primarily

pipelines) set commercial specifications

for the quality of the gasoline they will

accept that are more stringent than the

standard that applies to the downstream

party. This, in effect, forces refiners to

produce gasoline that is ‘‘cleaner’’ than

the refinery-level standard.

In other fuels programs (for example,

the benzene per-gallon standard for

RFG) we resolved this concern by

announcing enforcement tolerances for

fuels standards that apply downstream

of the refinery-level, thereby reducing

the need for pipelines to set

specifications more stringent than the

refinery level standards. We believe that

having more lenient downstream

standards will have the same effect as

enforcement tolerances.

In the NPRM we proposed that the

values of the downstream cap standards

would reflect the testing variability that

could reasonably be expected when

different laboratories test gasoline for

sulfur content; that is, lab-to-lab

variability, or reproducibility. Industry

commenters supported this approach,

and today’s rule adopts this approach.

For gasoline subject to the 80 ppm

refinery-level sulfur cap, the

downstream maximum standard is 95

ppm. This difference reflects the

reproducibility established by the

American Society for Testing and

Materials (ASTM).134 For gasoline

subject to refinery-level sulfur caps

higher than 80 ppm, which will be the

case for gasoline produced before 2006

and for gasoline produced by certain

small refineries through 2007, the

downstream cap is similarly established

by using ASTM reproducibility data.

The national downstream cap is 378 in

2004, when the refinery level cap can be

as high as 350 ppm. The national

downstream cap in 326 in 2005, when

the refinery level cap is 300.

Because these downstream caps are

based on sulfur test reproducibility, we

intend to amend the rule in the future

if improvements in test precision are

made for the designated method. We

may also consider amending the rule to

make some other method the designated

method if a more precise method is

available in the future.

The Proposed Downstream Standards

Compliance Scheme

Under the proposal, if gasoline

produced by a small refiner with a less

stringent cap standard is mixed in the

distribution system with gasoline

subject to the national cap standard, the

entire mixture would then be subject to

the higher cap standard, even though

most of the gasoline, at the refinery

level, would be subject to the more

stringent national cap standard. We

proposed that during the period that

small refinery individual standards are

in effect, for gasoline that is comprised,

in whole or in part, of small refiner

gasoline with a higher sulfur cap

standard than the national cap standard,

product transfer documents (PTDs)

would specify that the gasoline is small

refiner gasoline and the level of the

downstream cap applicable to the

gasoline.

The purpose of the proposed

provisions was to make it possible to

determine the standard that applies to

any gasoline downstream of the

refinery. If the gasoline contains no

small refiner gasoline, the downstream

standard would be based on the national

cap. If the gasoline is comprised, in

whole or in part, of small refiner

gasoline subject to a less stringent cap

standard, the downstream standard

would be based on this less stringent

cap standard. As gasoline is mixed and

remixed in the fungible distribution

system, the percentage of gasoline that

is small refinery gasoline will

progressively diminish until the

fungibly mixed gasoline meets the

national downstream cap. Therefore, we

proposed in the NPRM that a

downstream party may no longer

classify gasoline as containing small

refiner gasoline if a test result shows the

sulfur content of the gasoline is below

the applicable national (i.e., not small

refiner) downstream cap.

Several commenters suggested that

this tracking scheme would be

unworkable. Some of these comments

were based on the belief that the

proposal intended to require segregation

of the small refiner gasoline through the

distribution system. The proposal was

not intended to require that small

refiner gasoline must be segregated, and

under today’s final rule there is no

requirement that small refiner gasoline

must be segregated from gasoline

produced by other refiners. Some

commenters also believed that testing by

downstream parties would be required

under the proposed rule. These

commenters were concerned that a

downstream testing requirement could

be costly and could delay distribution of

gasoline. This latter point is addressed

later in this discussion. Some

commenters stated that the proposed

PTD provisions of the downstream

enforcement scheme were too complex

and that some means other than

changing PTD designations should be

found to track small refiner gasoline.

Other commenters, including

automobile manufacturer trade

associations, stated they believed that

EPA enforcement and testing

downstream of the refinery is necessary

to assure that gasoline complies with

standards at the retail gasoline pump.

We have carefully considered the

comments and we have concluded that

the tracking scheme as proposed would

not be effective because most pipeline

shipments are expected to include some

small refiner gasoline (although the

amount of small refiner gasoline may

comprise less than 1% of the shipment)

and therefore, most of the gasoline in

the nation might be classified as small

refiner gasoline, even though only a

small fraction of the supply will

actually be small refiner gasoline.

Therefore, a downstream cap much less

stringent than the national downstream

cap would attach to most gasoline

produced to meet the national refinery

standards, and the scheme would not be

effective in monitoring whether the

quality of most gasoline is maintained

after it enters the gasoline distribution

system.

The proposed scheme could lead to

other unintended results. The gasolines

contained in a fungible mixture in the

distribution system may not be fully

mixed and homogenous. As a result, a

distinct, unmixed, portion of gasoline

within a fungible mixture could be

small refiner gasoline with a sulfur

content above the national downstream

cap, while other parts of the fungible

mixture would meet the national

downstream cap. This is especially true

for fungible mixtures in pipelines and

could also be true for gasoline in storage

tanks. If a test result for a sample

collected from part of such a fungible

mixture in a pipeline shows compliance

with the national downstream cap,

under the proposed rule the entire

mixture would become subject to the

national downstream cap, and the

pipeline PTDs could not classify the

gasoline as small refiner gasoline. Thus,

6804 Federal Register / Vol. 65, No. 28 / Thursday, February 10, 2000 / Rules and Regulations

135For example, most pipeline shipments are

expected to contain small refiner gasoline in the

two U.S. pipelines that carry the highest volume of

gasoline. However, in most shipments the small

refiner gasoline is expected to account for

substantially less than 5% of the total volume of

gasoline in the shipment.

136For purposes of this discussion, ‘‘small refiner

gasolne’’ includes any gasoline from a refiner to

whom EPA grants relief based on a showing of

extreme hardship.

137See section IV.C. of this preamble for refiner/

importer standards and the discussion below

regarding downstream compliance and enforcement

provisions.

under the proposal, parties downstream

of the pipeline could be subject to

liability because they might receive

small refiner gasoline not meeting the

national standard even where a pipeline

PTD does not represent that the gasoline

is small refiner gasoline. That was not

intended by the proposal.

Because of these difficulties, we

concluded that the proposed scheme

must be modified to address these

concerns, in order for there to be

effective enforcement of the

downstream standards. We are

concerned that the quality of gasoline

will be affected downstream of the

refinery. Gasoline may be contaminated

with high sulfur blendstocks or other

high sulfur products such as distillates

after it leaves the refinery gate. There is

likely to be an economic incentive for

some downstream parties to sell or use

gasoline or blendstocks that have a

higher sulfur content than the national

downstream standard. The inability to

monitor downstream compliance would

result in environmental degradation that

is not intended by the rule, and in an

inability to assure a level playing field

for all parties in the gasoline

distribution industry.

Tracking Gasoline Downstream of the

Refinery

We believe that an effective

downstream compliance and

enforcement scheme is necessary in

order to achieve the full emissions

reduction benefits of the rule. Today’s

rule modifies the proposed tracking

scheme so that compliance with the

program can be monitored.

Under today’s rule, all gasoline

downstream of the refiner or importer is

subject to the national downstream

standard unless a different downstream

standard, based on the highest sulfur

content of any small refiner/temporary

refiner relief gasoline in the gasoline

mixture (as determined by the small

refiners’ batch testing), is supported by

PTDs and a test result confirming the

presence of small refiner/temporary

refiner relief gasoline. The test result

must be for gasoline sampled from the

downstream facility classifying the

gasoline as small refiner gasoline, unless

the facility is a trucker, retailer or

wholesale purchaser-consumer. We

have concluded that this requirement is

necessary to monitor compliance with

the downstream standards during the

period that small refiner/temporary

refiner relief standards are in effect,

because the vast majority of the gasoline

transported by pipelines will be

gasoline produced to comply with the

national cap,135 even though most of

those pipeline shipments will be

classified as small refiner gasoline.136

We believe that the ability to track

small refiner gasoline is made even

more important due to the geographic

phase-in area (GPA) gasoline provisions

finalized today.137 GPA gasoline is

subject to less stringent refiner/importer

standards than gasoline produced for

use in other parts of the country.

Therefore, its use is limited to the GPA

states. However, it may be produced or

imported at any location in the country

before it is transported for use in the

GPA. EPA would have little ability to

assure GPA-designated gasoline is only

being used in the GPA if it cannot

determine if gasoline at a downstream

location outside the GPA that exceeds

the applicable downstream cap for nonsmall refiner gasoline, is in fact small

refiner gasoline or if it may include

gasoline that was designated for use in

the GPA but has been diverted for use

elsewhere. The tracking requirements

for small refiner gasoline will help us to

make that determination.

The only parties required to perform

testing in order to demonstrate that a

shipment, or tank, of gasoline contains

small refiner gasoline are gasoline

pipelines and terminals. Where a

terminal properly classifies gasoline in

its storage tank as small refiner gasoline,

and subsequently receives a load of

gasoline into that tank, it may not

continue to classify the gasoline as

small refiner gasoline unless the tank is

sampled, and a test demonstrates that

the tank still contains small refiner

gasoline and the gasoline sulfur content

exceeds the national refinery level cap.

In 2004 the test result would have to

exceed 350 ppm; in 2005, 300 ppm; and

starting with 2006, 80 ppm. In the GPA,

the test result would have to exceed 350

ppm in 2004, and 300 ppm in 2005 and

2006.

We have concluded that the pipeline

and terminal testing provisions are

necessary for effective enforcement. We

believe that terminals and pipelines will

be able to perform sampling and testing

that will enable them to identify the

presence of small refiner gasoline in a

cost-effective manner. These parties

have knowledge regarding the mixing of

gasoline as it moves from the pipeline

and into the terminal tank, and

knowledge of the distribution system,

that will enable them to make

judgments regarding the extent of

testing that may be needed to

demonstrate whether gasoline meets the

national downstream cap. Further, a

terminal operator may take additional

tests if it believes a tank may contain a

stratified portion of small refiner

gasoline, despite a test result showing

the tank complies with the national

downstream cap.

Many terminals may have sufficient

reason to believe they are receiving only

gasoline meeting the national cap such

that they will not normally test each

receipt of gasoline. Additionally, even

for terminals who receive small refiner

gasoline, we do not believe the sampling

and testing will be burdensome. This is

partly because many terminals already

conduct periodic sampling, or even

sampling after every delivery of gasoline

into storage tanks, at least in the

summer VOC or RVP season, to test

gasoline for various parameters, which

may already include sulfur testing in

RFG areas. Field test instruments

already exist that are adequate for this

testing in 2004 and 2005 when the

national downstream cap is 378 ppm

and 326 ppm, respectively. Moreover,

we believe that because of today’s rule,

better field test instruments for sulfur

analysis at lower levels are likely to be

developed in the next few years.

Therefore, it will not be necessary for

quality assurance samples to be sent to

a laboratory for testing. Thus, we do not

believe shipments will be held up while

terminals await a test result. We also

believe that it is likely that these

instruments will be available for a cost

that will be far less than most laboratory

instruments available today.

Under today’s rule, retailers are not

required to conduct testing. The retailer

can demonstrate that the gasoline is

properly designated small refiner

gasoline subject to a less stringent

downstream standard by maintaining

PTDs from its suppliers that

demonstrate a terminal classified

gasoline supplied to the retailer’s

storage tank as small refiner gasoline.

Downstream Standards and

Requirements for GPA Gasoline

Consistent with the way today’s rule

sets downstream sulfur standards for

other gasoline, the GPA program

downstream standard is determined by

adding the ASTM reproducibility

applicable to the refinery level sulfur

Federal Register / Vol. 65, No. 28 / Thursday, February 10, 2000 / Rules and Regulations 6805

138As stated in section IV.C. of this preamble, the

GPA states are Alaska, Idaho, Montana, North

Dakota, Wyoming, Utah, Colorado and New Mexico.

139See 40 CFR 80.46(a). Today’s rule updates the

former designated test method, ASTM D 2622–94.

140See preamble discussion in section VI.E.,

below.

cap to that refinery level cap, which for

GPA gasoline is as high as 350 ppm in

2004, and 300 ppm in 2005 and 2006.

This results in downstream standards

for GPA gasoline of 378 ppm in 2004,

and 326 ppm in 2005 and 2006.

Because GPA gasoline must be used

only within the GPA states,138 today’s

rule requires that refiners and importers

producing or importing gasoline subject

to the GPA standards must designate

each such batch of gasoline as GPA

gasoline and segregate such batches

from all other gasoline. Product transfer

documents must identify the gasoline as

GPA gasoline so that all downstream

parties will be aware that it must be sold

or distributed for use only in the GPA.

Gasoline produced for use in all areas

of the country outside the GPA may be

sold for use in the GPA, including

gasoline subject to small refiner

standards under section 80.240 of

today’s rule.

Where GPA gasoline is commingled

with other gasoline, the commingled

gasoline must be classified as GPA

gasoline and used only in the GPA

states. Where GPA gasoline is

commingled with S–RGAS, the

applicable downstream sulfur standard

for that gasoline is the greater of the

GPA downstream standard or the

applicable small refiner/temporary

refiner relief standard as determined

under section 80.210 of the rule.

Lead-Time for Downstream Compliance

With New Standards

Some commenters stated that there

should be a lead-time of several months

between the implementation date of a

new refinery level sulfur standard and

the implementation date of the

corresponding downstream standard.

Based on our experience with other

fuels programs, we believe that a onemonth lead time will be adequate for

gasoline at the terminal level to meet

new standards. An additional one

month for retailers will give them ample

time to comply. Therefore, under

today’s rule, the 378 ppm downstream

sulfur standard (or any applicable small

refiner downstream cap standard) is

effective February 1, 2004 at the

terminal level and March 1, 2004 at the

retail level. The 326 ppm downstream

sulfur standard is effective February 1,

2005 at the terminal level and March 1,

2005 at the retail level. The 95 ppm

downstream standard is effective

February 1, 2006 at the terminal level

and March 1, 2006 at the retail level (or

February 1, 2007, and March 1, 2007,

respectively, in the case of gasoline at

facilities in the GPA).

Retail Gasoline Pump Labeling

EPA believes gasoline advertised as

being ‘‘low sulfur gasoline’’ when sold

at retail outlets should have a sulfur

content of no more than 95 ppm because

this is the maximum sulfur level of

gasoline at retail outlets that would

protect the emission controls of Tier 2

vehicles. We are stating this to inform

refiners and other regulated parties,

when making advertisement decisions

regarding gasoline, that it is EPA’s

position that effective January 1, 2004,

if any retailer represents that gasoline is

low sulfur gasoline, or representations

to the same effect, the gasoline sulfur

content should be no greater than 95

ppm.

D. Testing and Sampling Methods and

Requirements

1. Test Method for Sulfur in Gasoline

We proposed ASTM standard method

D 2622–98, ‘‘Standard Test Method for

Sulfur in Petroleum Products by

Wavelength Dispersive X-ray

Fluorescence Spectrometry,’’ as the

primary method for testing sulfur in

gasoline by refiners and importers. This

is the designated method under the

RFG/CG rule.139 We also requested

comment on adopting other methods as

the primary method, in particular,

ASTM method D 5453–93, ‘‘Standard

Test Method for Determination of Total

Sulfur in Light Hydrocarbons, Motor

Fuels and Oils by Ultraviolet

Fluorescence,’’ and ASTM D 4045,

‘‘Standard Test Method for Sulfur in

Petroleum Products by Hydrogenolysis

and Rateometric Colorimetry,’’ which is

used under the California fuels program

for sulfur levels below 10 ppm. We also

proposed ASTM D 5453 as an

alternative method for determining the

sulfur content of gasoline and we

requested comment on this proposal.

Most comments supported the

continued use of ASTM D 2622 as the

designated method for testing sulfur in

gasoline under the various fuels rules,

including today’s rule. Commenters

indicated that most refineries outside of

California are currently using ASTM D

2622. Under the California fuels

regulations, California refineries

currently use ASTM D 5453, as well as

ASTM D 2622 and ASTM D 4045.

Comments were generally favorable to

the proposed use of ASTM D 5453 as an

alternate method. However, one

California refinery, an automobile

manufacturers association and a

manufacturer of analytical equipment

stated that ASTM D 5453 should be the

primary method, primarily due to its

greater precision at low sulfur levels.

Favorable comments were received to

the use of ASTM D 4045, especially for

gasoline sulfur content of 10 ppm or

less. One commenter suggested that

ASTM D 5623–94 should be allowed;

one commenter suggested that ASTM D

3120 should be allowed, and one

commenter suggested that ASTM D

6428 should be allowed. Several

commenters stated that we should

utilize a performance based criteria

system to determine what test methods

can be used.

We have considered the comments

carefully. We believe there are a number

of test methods for determining the

sulfur content of gasoline that may

eventually be shown to be as good as,

or better than, ASTM D 2622. We also

considered that the Agency is likely to

issue a proposed rulemaking for a

performance-based test method

approach that would apply to motor

vehicle fuel parameters. This rule, once

promulgated, would set forth criteria for

determining whether an alternative

analytical test method could be used

instead of the designated analytical test

method for a given fuel parameter and

would set forth criteria for correlating

alternative analytical test methods to the

designated analytical test method.

We believe it is appropriate that

alternate analytical methods should be

qualified and correlated to the

regulatory method according to

standardized criteria. Today’s rule

therefore provides that ASTM D 2622,

the recognized standard analytical

method for determining sulfur in

gasoline, is the sole regulatory method,

anticipating that a performance-based

testing rule may be issued before 2004,

and that under its terms anyone will be

able to qualify and correlate additional

testing methods. We do not believe this

will result in undue hardship for several

reasons. First, our current fuels rules

already provide that ASTM D 2622 is

the sole regulatory method for

determining the sulfur content of

gasoline. Second, California refiners

currently using ASTM D 5453 or ASTM

D 4045 will not face any hardship

because today’s rule allows the use of

approved California test methods by

California refiners.140 Third, today’s

rule allows continued use of composite

samples for sulfur testing for CG during

the period of early credit generation,

and therefore refiners currently using

outside labs to test composite samples,

6806 Federal Register / Vol. 65, No. 28 / Thursday, February 10, 2000 / Rules and Regulations

141ASTM D 5623, entitled ‘‘Standard Test

Method for Sulfur Compounds in Light Petroleum

Liquids by Gas Chromatography and Sulfur

Selective Detection.’’

142ASTM D 2784, entitled ‘‘Standard Test

Method for Sulfur in liquefied Petroleum Gases’’;

ASTM D 4468–85(1995), entitled ‘‘Standard Test

Method for Total Sulfur in Gaseous Fuels by

Hydrogenolysis and Rateometric Colorimetry’’; and

ASTM D 3246–96, entitled ‘‘Standard Test Method

for Sulfur in Petroleum Gas by Oxidative

Microcoulometry.’’

143ASTM D 3227, entitled ‘‘Mercaptan sulfur in

Gasoline, Kerosine, Aviation Turbine, and Distillate

Fuels’’. The commenter suggested it should be

allowed with the use of the x-ray finish. 144 Discussed in section VI.D.3.

but who may elect to conduct testing inhouse when the every-batch sulfur

testing requirement is implemented,

will not need to determine whether a

less expensive alternative to ASTM D

2622 is available for several years. Last,

if a performance-based test method rule

is not issued by the Agency in the near

future, then we may reconsider this

issue in a subsequent rulemaking.

We also believe that a standardized

approach for determining the

appropriateness of alternate test

methods, correlation methodology and

quality control criteria for alternate test

methods would be the most fair

approach to the test equipment

manufacturers and to the purchasers of

testing equipment. It should result in a

level playing field for competition

among manufacturers of test equipment.

We already know that ASTM D 5453

can be purchased for about half the

price of ASTM D 2622 equipment, and

competition may result in even less

expensive equipment.

Some commenters suggested that

where a refiner or importer uses ASTM

D 2622 to test gasoline, and where the

test result is less than 10 ppm, the

refiner or importer should be able to

report a test result of zero or perhaps

use a default value of 5 ppm. This sort

of approach has been allowed under the

RFG and Anti-dumping Question and

Answer Document. However, we

disagree with the commenters that this

practice is appropriate under the sulfur

rule. Under the sulfur rule, with a

refiner average standard of 30 ppm, it is

important whether a bias is consistently

drawn in favor of zero ppm as opposed

to 10 ppm. This could artificially

increase the number of credits earned or

could allow more batches to be

produced by the refiner that are near the

80 ppm cap. We believe that any

imprecision of sulfur values derived

from analysis using ASTM D 2622, will,

over the course of numerous batches,

average out to near zero. Further, we

believe that the precision of ASTM D

2622 is likely to be improved by 2004.

Also, by 2004 there may be other

methods that will be shown to be

precise at low sulfur levels that may be

made available for use under a

performance-based test method rule.

Under today’s rule the refiner or

importer must report the test result that

the test method provides, so long as the

result is not less than zero (in which

case a result of zero would be reported).

If alternative methods are ultimately

made available for use under a

performance based rule, refiners and

importers who are producing or

importing gasoline with low levels of

sulfur may desire to use an alternative

test method for low sulfur levels,

especially if ASTM D 2622 is less

precise at such levels. Under today’s

rule, if any approved alternative method

is used for this purpose, a party could

not choose to use the test result from

ASTM D 2622 when its result is lower,

and the test result from the alternative

method when its result is lower. For any

alternative test method that is

eventually approved, if the party uses it

for a certain range of sulfur

concentrations, and ASTM D 2622 for

another range, it must be consistent in

such use. For example, if the alternate

method were used for test results below

10 ppm, its result would always have to

be used for sulfur levels below 10 ppm

and ASTM D 2622 would always have

to be used for sulfur levels greater than

10 ppm.

2. Test Method for Sulfur in Butane

We proposed the use of ASTM

standard test method D 5623–94 141 as

the designated method for testing the

sulfur content of butane and requested

comment on whether this method

should be the designated method.

Although some butane suppliers or

refiners currently use this method,

several commenters stated that many

refiners do not have ready access to

ASTM D 5623 and that it is not

necessarily the most precise method for

determination of low levels of sulfur in

butane. Commenters suggested at least

three other methods are equal to ASTM

D 5623. These are ASTM D 2784, ASTM

D 4468, and ASTM D 3246.142 One

commenter also suggested that ASTM D

3227–92,143 should be allowed. Several

commenters requested that EPA at least

allow alternative test methods for

quality assurance testing.

We have reviewed the suitability of

ASTM D 5623 and agree that it is not

the best method for testing for sulfur

content in butane. ASTM D 5623

measures sulfur compounds rather than

total elemental sulfur, and the current

ASTM 5623 method is specified for

liquid fuels, not gaseous fuels.

ASTM D 2784 does not seem to be a

better method than ASTM D 5623.

Commenters stated that ASTM D 2784

is not the most precise method and that

it is not widely used. We believe there

may be some difficulty in even

obtaining the apparatus for ASTM D

2784. ASTM D 3227 is not appropriate

since it is designed for measuring a

single sulfur compound, and it is

currently designated for testing liquid

samples.

We believe that ASTM D 4468

appears to be a good method for testing

butane for sulfur levels below 20 ppm.

However, dilution would be necessary

to test for sulfur levels above 20 ppm.

This may be problematical, since it may

be difficult to dilute a gaseous fuel. We

expect that under today’s rule, butane

being tested will frequently have sulfur

content in excess of 20 ppm. Several

other methods exist that might work

well for testing for sulfur content of

gaseous fuels, but their current scope

does not include determination of sulfur

in gaseous fuels.

ASTM D 3246–96, which was

suggested by API and NPRA as a

suitable method, is an appropriate

method for measuring gaseous

compounds and provides test results for

total elemental sulfur. Its range is 1.5 to

100 ppm, which is ideal for testing for

the alternative 30 ppm butane sulfur

standard applicable to butane blenders

promulgated in today’s rule.144

After considering the strengths and

weaknesses of all the available options

we believe ASTM D 3246 is the best

currently-available method. Therefore,

today’s rule makes ASTM D 3246 the

designated method for testing the sulfur

content of butane or other gaseous

blendstocks. As discussed above, we

anticipate that a performance-based test

method rule for motor vehicle fuel

parameters may be promulgated before

2004, and that the efficacy of other

methods would be demonstrable under

that rule. However, if that is not the

case, the Agency may reconsider the

issue of appropriate alternate test

methods in a future rulemaking.

3. Quality Assurance Testing

Several commenters urged that

alternate test methods be allowed for

quality assurance test purposes. Under

today’s rule, the use of alternate test

methods for quality assurance testing for

purposes of establishing a defense to

liability, for butane quality assurance

testing under section 80.340(b)(4), and

for determination of whether gasoline is

small refiner gasoline, is allowed, so

long as the alternate test method is

correlated to the regulatory test method,

the method is ASTM approved, and the

Federal Register / Vol. 65, No. 28 / Thursday, February 10, 2000 / Rules and Regulations 6807

145Except for certain truck importers, as noted

above.

146As noted above, we are not requiring every

batch testing for CG parameters other than sulfur.

protocols under the method are

followed. However, the regulatory

method is required for the truck

importer quality assurance testing under

section 80.350(c).

4. Requirement To Test Every Batch of

Gasoline Produced or Imported

We proposed in the NPRM that

refiners and importers 145 would be

required to sample each batch of

gasoline produced or imported and

perform a test on each sample to

determine the sulfur content prior to the

gasoline leaving the refinery gate or

importer facility. We received

comments on several aspects of this

proposed requirement.

Several commenters urged that we

continue to allow composite sampling

and testing for sulfur. Some refiners

commented that the requirement to test

each batch would raise testing costs.

However, one refiner commented that

every-batch testing for sulfur would not

be a substantial burden so long as everybatch testing for other CG parameters is

not required.146 This commenter stated

that testing for sulfur content is much

less complex than testing for certain

other CG parameters.

We believe that with a refinery gate

sulfur cap combined with refinery

averaged standards, there is no realistic

alternative to every-batch testing. The

Agency has no way to know whether a

composite sample that is tested and

found to meet the applicable refinery

cap included a sample from an

individual batch of gasoline that was

introduced into commerce that

exceeded the cap by a factor of 2 or 3.

Further, we believe that with averaged

standards for refiners and importers,

and with multiple cap standards in

effect during the phase-in period,

monitoring compliance without everybatch testing would be impossible even

if we could somehow be assured that no

individual batch significantly exceeded

the applicable refinery level cap.

We realize that there will be an

additional cost associated with testing

every batch of CG—for sulfur content

(this is already required for RFG).

However, we believe less expensive test

methods for sulfur content already exist,

and may continue to be developed, that

will likely be acceptable as alternative

methods in the future, as discussed

above. Therefore, today’s rule retains

the requirement for every-batch testing.

Under today’s final rule, the test results

for each batch of gasoline will be used

to determine compliance with the

applicable refiner/importer cap standard

and to calculate the refiner’s or

importer’s annual average sulfur level.

Any batch of gasoline that exceeds the

applicable sulfur cap cannot be

distributed or sold in the U.S. (unless it

is exempted from the standards under

today’s rule, as described in section

VI.G., below).

Refiners who use computerized inline blending methods objected to the

proposed requirement for a batch test

before the gasoline is released from the

refinery. These commenters stated that

refiners using the sophisticated in-line

blending practice cannot produce a

complete batch test until a portion of

the batch is already past the refinery

gate. These commenters did not urge

that we eliminate the requirement for

every-batch testing, but urged that the

sulfur rule adopt the RFG rule

provisions for in-line blending found at

40 CFR 80.65(f)(4), for both RFG and

CG.

We believe that the importance of

assuring compliance with the refinery

level cap is such that the rule must

generally require that gasoline must be

tested for sulfur content before it leaves

the refinery. Based on experience under

the RFG rule, we do not believe that the

requirement to test each batch before it

is released will substantially increase

the cost of testing or cause delays in

shipments.

However, today’s rule recognizes the

unique circumstances involved in

computerized in-line blending. We

believe that with appropriate

safeguards, compliance with sulfur

standards for gasoline produced by

refineries using in-line blending can be

assured. Therefore, today’s rule

incorporates the RFG rule provisions for

in-line blending at 40 CFR 80.65(f)(4).

Such provisions will be applicable to

RFG and CG. However, refineries

presently having an in-line blending

waiver will be asked to submit

additional information under the

auditing procedures included in

approvals of in-line blending petitions

already in place. We will contact

individual holders of in-line blending

approvals to request information on

how sulfur is monitored and how

streams of gasoline are distributed in the

in-line blending process. If we cannot

conclude that the monitoring

procedures will assure compliance with

sulfur standards, we will revoke the inline blending approval for that purpose.

We believe it is important to ensure that

the in-line analyzer technology and the

refiner’s methodology and procedures

are sufficient for the gasoline sulfur

levels the refinery will have after this

rule is implemented, for both RFG and

CG.

Several commenters stated that the

proposed rule’s requirement to test

every batch of CG for sulfur is

unnecessary during the period of early

credit generation because there is no cap

standard in effect during this period,

even for those refiners generating

credits. We agree that every-batch

testing is not essential for CG until the

refinery gate per-gallon cap standards go

into effect. Thus, today’s final rule

allows composite sample testing for CG

to continue during the period of early

credits generation, until January 1, 2004,

when a cap standard for sulfur is first

imposed on gasoline.

5. Exceptions to the Every-Batch Testing

Requirement

Under the RFG rule, refiners who

blend butane or other blendstocks to

previously certified gasoline (PCG) must

determine the volume and parameter

values of the blendstock, including

sulfur content, by testing the gasoline

before and after blending, and

calculating the properties of the

blendstock by subtracting the volume

and parameter values of the PCG. For

CG only, under certain conditions, we

have allowed butane blenders to use the

parameter specifications of butane as

tested by the butane producer. We have

allowed this alternative to every-batch

testing because of the costs of testing

each load of butane. We proposed a

similar alternative to every-batch testing

for butane blenders in the NPRM, which

allows butane blenders to use the sulfur

test result of their suppliers, if the

butane contains no more than 30 ppm

sulfur and if the butane blender

undertakes a quality assurance program

of periodic sampling and testing to

ensure that the supplier’s sampling and

testing is accurate.

We also proposed to allow refiners

that blend other blendstocks into PCG to

meet an alternative testing requirement

in lieu of testing every batch of gasoline.

Provided that the refiner’s test result for

the sulfur content of each of the

blendstocks is less than the national

refinery level per-gallon cap standard, a

refiner can sample and test each

blendstock when received at the

refinery, and treat each blendstock

receipt as a separate batch for purposes

of compliance calculations for the

annual average sulfur standard.

Today’s rule adopts these provisions.

Several commenters urged us to delay

the 30 ppm per-gallon cap standard

until other refiners must meet a 30 ppm

average standard. The proposed 30 ppm

per gallon standard was intended to be

environmentally neutral in relation to

6808 Federal Register / Vol. 65, No. 28 / Thursday, February 10, 2000 / Rules and Regulations

147See Table IV.C.–1.

148See the discussion on this subject in the

preamble to the reformulated gasoline program’s

final rule, 59 FR 7765 (Feb. 16, 1994).

149See 40 CFR 80.65(f)(3)(F)(ii), and the Proposed

Rule for Modifications to Standards and

Requirements for Reformulated and Conventional

Gasoline, 62 FR 37337 et seq, proposed 40 CFR

80.101(i)(1)(i)(C)(iii).

the standard applicable to other refiners.

Therefore, today’s final rule makes clear

that for the alternative compliance

approach for butane blenders, the 30

ppm per-gallon cap is not applicable

until January 1, 2005. The per-gallon

cap starting January 1, 2004 is 120

ppm.147 For GPA gasoline the per-gallon

cap under this alternative compliance

option is 150 ppm in 2004 through

2006.

6. Sampling Methods

Sampling methods apply to all parties

who conduct sampling and testing

under the rule. We proposed to require

the use of sampling methods that were

proposed in the July 11, 1997 Federal

Register notice for the RFG/CG rule (62

FR 37338, at 37341–37342, 37375–

37376). These sampling methods

include ASTM D 4057–95 (manual

sampling), ASTM D 4177–95 (automatic

sampling from pipelines/in-line

blending), and ASTM D 5842 (this

sampling method is primarily

concerned with sampling where

gasoline volatility is going to be tested,

but it would also be an appropriate

sampling method to use when testing

for sulfur). There were no adverse

comments to the proposed sampling

provisions. Today’s rule adopts the

methods as proposed.

7. Gasoline Sample Retention

Requirements

In the NPRM, we proposed a refiner

and importer (collectively referred to in

this section as ‘‘refiner’’) sampling and

testing program to establish the sulfur

compliance of each batch of gasoline

produced or imported. We were aware

that there were possible drawbacks to a

self-testing scheme. For example, a

party might sample or test gasoline in a

manner that is inconsistent with the

required procedures, or employees

might inaccurately record the test

results by mistake or otherwise. Parties

might also attempt to conceal a

discovered violation or to save money

by not correcting a violation.

To address our concerns about selftesting, we considered an alternative

option of requiring independent

sampling and testing for all gasoline,

including conventional gasoline. We did

not propose this requirement for

independent sampling and testing for all

gasoline because of the costs of such a

requirement,148 and we are not adopting

such a program in today’s final rule.

Instead, we proposed in the NPRM a

different strategy to complement the

self-testing program that would help

ensure refinery sulfur compliance. This

strategy would have required refiners to

retain for thirty days a representative

sample from each batch of gasoline

produced, and to provide such samples

to the Agency upon request. We

believed that, by means of this option,

EPA could verify the refiner test results.

We believe that this would create an

incentive for refiners to sample, test,

and record their sulfur results in an

accurate and truthful manner. We also

proposed that refiners be required to

certify annually that the samples have

been collected in the manner required

under the sulfur rule. In addition, we

proposed that specific procedures be

followed by refiners to properly collect,

retain, and ship the samples in a

manner consistent with requirements

already imposed or proposed under the

RFG program. Under the proposal, a

minimum representative sample of 330

ml of each gasoline batch would need to

be retained (and submitted to EPA upon

request).149

Although there were few comments

on this proposal, one commenter, the

National Petrochemical & Refiners

Association (‘‘NPRA’’), did comment

extensively on it, and strongly urged the

Agency not to finalize it. One of the

points raised by the NPRA was that the

RFG regulations have their own sample

retention and submission requirements,

(40 CFR 80.65), so that a sulfur rule

provision for RFG batches was not

necessary. The Agency continues to

believe that sample and retention

requirements are useful to ensure

compliance with the sulfur standards,

but we agree with NPRA that the sample

retention and submission requirements

found in the RFG rule will serve equally

as well for the sulfur rule. Therefore, the

final sulfur rule requires all refiners,

including those producing RFG, to

comply with the sulfur rule’s retention

requirements. However, any refiner of

RFG using an independent laboratory

pursuant to 40 CFR 80.65(f), either

under the 100% Option or the 10%

Option, will be considered to be in

compliance with the sulfur rule’s retain

requirements provided the refiner

ensures that the independent laboratory

conducting the retain program for the

refiner, is in compliance with these

requirements. In particular, the refiner

must ensure that its independent

laboratory sends the appropriate

certificate of analysis along with any

sample forwarded to EPA. Under the

RFG program’s 100% Option, the refiner

must ensure that its independent

laboratory sends the independent lab’s

certificate of analysis; and under the

10% Option, the refiner must ensure

that its independent laboratory sends

the refiner’s certificate of analysis.

In addition to urging EPA not to

finalize the sample retention and

submission requirements for RFG

gasoline, NPRA urged us not to finalize

these requirements for CG as well.

NPRA argued that these requirements

would not prove useful in deterring

non-compliance with the sulfur

requirements for this product, primarily

because false samples could be

forwarded to EPA. The Agency

disagrees with NPRA’s argument. First,

the goal of these requirements is not

only to deter cheating but also to reveal

inadequacies that exist in refiners’

sulfur testing procedures. We do not

expect that most non-compliance with

the sulfur standards will occur through

cheating, but rather through operational

problems. Agency enforcement

experience under the RFG rule reveals

that some refiners’ testing procedures

are not always accurate in measuring

parameters and thus detecting

noncompliance. EPA verification testing

will expose such testing inaccuracy,

enabling the refiner to improve its

testing procedures and thus improve its

ability to detect, and correct, its own

compliance problems. To ensure the

effectiveness of these sulfur sample

retention and submission requirements,

the final rule requires all refiners to

provide EPA with the sulfur test result

the refiner has obtained for the sample,

along with each sample the refiner

provides to the Agency under this rule.

EPA will use these retained samples

in compliance determinations. Gasoline

samples that are forwarded to EPA

under the sample retention

requirements that are found to be in

violation of a refinery cap, will be

considered by EPA to be evidence of

violations of the cap standard,

regardless of the refiner’s own test

result. In addition, EPA testing of these

samples may establish that the refiners’

test results are generally incorrect, i.e.,

are biased. EPA will evaluate whether

such a bias constitutes evidence of a

violation of the sulfur average standards

applicable to the refiner, including

whether the bias extends to other sulfur

tests conducted by the refiner during the

current or previous averaging periods.

Further, evidence of testing bias could

constitute evidence a refiner has not met

the requirement to conduct sulfur

testing in accordance with specified

Federal Register / Vol. 65, No. 28 / Thursday, February 10, 2000 / Rules and Regulations 6809

150See 40 CFR 80.81(g).

procedures, and any reports submitted

to EPA that reflect the bias could be

evidence a refiner has not met the

requirement to properly report the

sulfur content of gasoline produced.

While it is true that a party can

submit false samples to EPA in order to

prevent the Agency from discovering

what in actuality is a non-compliant

batch of gasoline, we do not believe that

there will be many examples of such

flagrant cheating. Our enforcement

experience indicates that the great

majority of parties regulated under the

fuels programs work to comply with the

regulatory requirements. We believe that

the potential penalties for the

submission of false samples to the

government, and the potential criminal

liability which such conduct would

subject parties to under to section 113

of the Clean Air Act, will act as

significant deterrents to this cheating.

Last, to further decrease perceived

incentives for such cheating, the

regulation specifically requires that the

refinery official signing and submitting

the refinery’s annual sulfur report must

make inquiries to verify the correctness

of the sampling collection and retention

procedures and include with the annual

sulfur report a personal certification of

the correctness of the procedures used

to collect the retained samples. If such

certification cannot be made, then the

report cannot be timely filed.

NPRA further commented that CG

being counted to create early credits

under the sulfur rule’s ABT program

should not be subject to the proposed

sample retention and submission

requirements. NPRA argues that the lack

of a sulfur cap during the early credit

timeframe makes such retention and

submission unnecessary. The Agency

disagrees. During the early credit

generation timeframe, refiners

participating in the credit program must

comply with sulfur averaging

requirements, even though sulfur caps

are not required to be met. Accurate

determination of compliance with the

averaging requirements necessitates

accurate sulfur testing in the early credit

period, just as it does during

implementation of the full sulfur

program, even though sulfur testing of

CG composite samples will be

permitted. Hence, the sample retention

and submission requirements, whose

purpose is to ensure accurate testing

and compliance determination,

continue to be necessary for the early

credit period. The final rule retains the

sample retention requirements for CG

during the early credit time frame.

NPRA also suggested that in place of

the proposed 30 day sample retention

requirement, EPA instead should

require refiners to maintain samples

only from the last three batches of

gasoline produced. NPRA argued that

this alternative requirement would

prove more economical for the refiners,

yet would still provide EPA with the

ability to test some samples itself.

Although the Agency believes that the

proposed 30 day retention period would

provide a valuable amount of samples to

be retained and thus available for testing

by EPA, the Agency agrees that a more

limited sample retention requirement

could provide an acceptable means of

confirming refiner testing accuracy and

sulfur compliance, while being less

burdensome to refiners. We do not

believe, however, that retention of

samples from only three batches of

gasoline would be effective in

accomplishing the goal of producing

greater testing accuracy. Three samples

would not be a great enough number to

realistically demonstrate if a pattern of

testing irregularities exists or to

demonstrate that a significant volume of

the refiner’s production is covered by

the testing verification process.

Consequently, instead of the three batch

sample retention requirement proposed

by this commenter, the Agency has

instead required in the final rule that at

least the last 20 samples be retained,

and that each sample be retained for a

minimum of 21 days. The Agency

believes this amended requirement

addresses NPRA’s concern that the

amount of days of sample retention be

reduced from thirty days, while also

providing the Agency with an effective

means of assuring a reasonable number

of samples, representing a significant

period of refining activity, will be

available for accuracy testing. We

believe the retention requirement is not

burdensome given the limited number

of samples that must be retained.

Further, many refineries already retain

samples.

A final comment by NPRA about the

sample retention and submission

requirements is addressed in the final

rule. NPRA raised a concern about the

required retention and submission of

samples of pressurized blendstock,

particularly butane, which would

require the use of specialized highpressure containers. The Agency agrees

that there is legitimate concern about

the handling, storing and shipping of

such samples. We also believe that the

final rule’s quality assurance testing

requirements and the testing

requirements for blendstock suppliers

provides adequate assurance of the

compliance of these blendstocks. Hence,

the final sulfur rule does not contain a

requirement that samples of pressurized

blendstock must be retained.

E. Federal Enforcement Provisions for

California Gasoline and for Use of

California Test Methods To Determine

Compliance

Requirements to Segregate Gasoline and

to Use Product Transfer Documents for

Certain California gasoline; Definition of

California Gasoline

In the NPRM, the Agency proposed to

generally exempt from the requirements

of the federal sulfur rule certain gasoline

sold or intended for sale in California.

For the purpose of program consistency,

the gasoline to be exempt in the sulfur

rule would meet the same definition of

California gasoline as found in the RFG

rule (40 CFR 80.81(a)(2)). The exempt

gasoline would include all gasoline

sold, intended for sale, or made

available for sale in California that was

also either: produced within California;

imported into California from outside

the U.S.; or imported into California

from another state, provided that the

out-of-state refinery did not also

produce federal RFG.

Although the NPRM proposed to

exempt California gasoline from

compliance with the proposed sulfur

standards (for reasons discussed

elsewhere in this preamble), we did

propose two requirements that would

apply to some exempt California

gasoline. The first would require exempt

gasoline produced outside of California

but intended for use in California, to be

segregated from non-exempt gasoline at

all points in the distribution system.

The second would require out-of-state

producers of exempt gasoline intended

for sale in California to create PTDs

identifying the product as California

gasoline, and would require such PTDs

to be provided to all transferees of this

gasoline in the distribution system.

Requiring such documentation is

intended to facilitate enforcement and

compliance by identifying gasoline that

is not federally regulated. The same PTD

requirements currently apply under the

RFG program.150

One commenter expressed a

reservation about the sulfur rule’s

proposed segregation requirement. The

commenter was concerned that the

segregation requirement for exempt

California gasoline might interfere with

the ability of California importers to

import into California, non-exempt,

federal RFG gasoline that happened to

comply with California Air Resources

Board (ARB) sulfur requirements, but

had not been kept segregated by its outVerDate 27<JAN>2000 21:29 Feb 09, 2000 Jkt 190000 PO 00000 Frm 00113 Fmt 4701 Sfmt 4700 E:\FR\FM\10FER2.SGM pfrm08 PsN: 10FER2
6810 Federal Register / Vol. 65, No. 28 / Thursday, February 10, 2000 / Rules and Regulations

of-state refiner from the refiner’s federal

RFG product. Out of a concern about

potential gasoline supply problems in

California, the commenter asked for

assurances from the Agency that such

gasoline would not be prohibited from

sale in California because of the sulfur

rule’s segregation requirement.

The Agency agrees that it would not

be beneficial to restrict the flow of

complying gasoline into California.

However, since the federal and the ARB

sulfur control programs provide for

differing calculations of standard

compliance, and since the standards

themselves are not always consistent

between the two programs, EPA does

not believe that the compliance of

gasoline produced for federal purposes

will necessarily assure its compliance

with ARB program requirements, and

vice-versa. Therefore, we believe it is

necessary to require the physical

segregation of the gasolines produced

for the different programs in order to

best ensure compliance with our

uniquely determined federal sulfur

standards. To ensure segregation, it is

necessary that refiners and importers

designate gasoline batches destined for

California as California gasoline and

that PTDs identify the gasoline as being

for use only in California.

Further, one of the purposes of

creating the California exemption in the

federal sulfur rule is to ensure the

exclusion of California gasoline from the

refiner’s compliance calculations under

the federal rule. This exclusion is

necessary to prevent gasoline that is

produced to comply with the strict

California standards from unfairly

effecting the refiner’s compliance with

the federal requirements, thereby

facilitating the production of higher

sulfur gasoline for use in a federal

market supplied by the refiner. EPA

believes that segregation of the two

gasolines is necessary because it

facilitates accurate identification of the

product to be included solely in the

federal compliance calculations.

EPA does not believe that requiring

the segregation of California gasoline

from gasoline produced for the federal

market should create a significant

restriction in the flow of gasoline to

California. The Agency believes that if

a California marketer needs to acquire

ARB-complying gasoline from out-ofstate, the marketer should generally be

able to satisfy that need by ordering a

batch of California gasoline to be created

for it by out-of-state producers. Under

this circumstance of the creation of a

unique batch of California gasoline,

segregation of the gasoline will typically

be assured.

In analyzing the above comment on

segregation of California gasoline, the

Agency realized that the sulfur rule’s

proposed definition of exempted

California gasoline, which paralleled the

definition existing in the RFG rule, was

not as complete as it should be to

properly address the unique needs of

the sulfur program. Specifically, the

exclusion from the sulfur rule’s

exemption of out-of-state gasoline sold

or intended for sale in California solely

because it happens to be produced at a

refinery that produces federal RFG

gasoline, is not appropriate. Basing an

exemption on whether or not an out-ofstate refinery produces federal RFG is

relevant to the RFG program, but it has

no relevance to the sulfur control

program. To ensure effective

determination of compliance with

federal sulfur standards, the final sulfur

rule deletes any reference to RFG

production in the rule’s definition of

exempt California gasoline. Hence, the

example presented in the comment, in

which out-of-state gasoline for sale in

California could be considered nonexempt gasoline, would not arise under

the expanded definition of California

gasoline.

Use of California Test Methods and OffSite Sampling Procedures for 49 State

Gasoline

Under the NPRM and the final rule,

refineries and importers located in

California would be required to meet the

federal sulfur standards and other

requirements with regard to their

‘‘federal’’ gasoline to be used outside of

California. However, we proposed that

gasoline produced in California for sale

outside of California could be tested for

compliance under the federal sulfur rule

using the methodologies approved by

the ARB, provided that the producer

complies with the procedures for such

testing as already required under 40

CFR 80.81(h), which permits California

test methods not identical to federal test

methods to be used for conventional

gasoline. Today’s rule adopts this

provision, as well as the corollary

proposed provision that gasoline

produced by California refiners for use

out-of-state may be tested at off-site

testing as already permitted pursuant to

40 CFR 80.81(h) for CG purposes. Both

provisions in today’s rule should

alleviate duplicate testing burdens on

California refiners subject to both the

federal and California programs, since

the test methods acceptable under these

alternative provisions in today’s rule are

also currently used to comply with

California requirements. No comments

were received on these provisions.

F. Recordkeeping and Reporting

Requirements

1. Product Transfer Documents

Small Refiner Gasoline Transfers

The NPRM proposed that the business

practice PTDs that accompany each

transfer of custody or title of gasoline

that includes gasoline produced by any

small refiner subject to sulfur rule

individual refinery standards would be

required to identify the gasoline as such,

including the applicable downstream

cap, as an aid to enforcing the national

downstream cap. Today’s rule adopts

the proposed PTD requirement, with

modifications regarding how the PTD

requirement relates to testing, as

described in section VI.C. The

requirement for printing information on

PTDs has been simplified in the final

rule. All parties may use brief codes to

identify the small refiner status of the

gasoline and to identify the small refiner

downstream standard it is subject to.

This small refiner gasoline PTD

provision is also applied to gasoline

subject to individual refinery standards

under the temporary refiner relief

provision of today’s rule.

GPA Gasoline Transfers

Under the geographic phase-in

program finalized today, gasoline

produced or imported for use in the

GPA may be used only in the GPA

states. Therefore, it is necessary for

PTDs for gasoline that is comprised in

whole, or in part, of GPA gasoline, to

identify the gasoline as such and state

that the gasoline may not be distributed

or sold for use outside the GPA. Product

codes may be used to provide this

information, except in the case of

transfers to truck carriers, retailers and

wholesale purchaser-consumers.

2. Recordkeeping Requirements

Under today’s rule, refiners and

importers will be required to keep and

make available to EPA certain records

that demonstrate compliance with the

sulfur program standards and

requirements. This includes records

pertaining to the generation, use and

transfer of credits and allotments. The

RFG/CG regulations currently require

refiners and importers to retain records

that include much of the information

required in the sulfur rule. Where this

is the case, there is no requirement for

duplication of records or information.

Under the final rule, all parties in the

gasoline distribution system, including

refiners, importers, oxygenate blenders,

retailers, and all types of distributors

will be required to retain PTDs and

records of quality assurance programs

(including, where applicable, sulfur test

Federal Register / Vol. 65, No. 28 / Thursday, February 10, 2000 / Rules and Regulations 6811

151Five years is the applicable statute of

limitations for the RFG and other fuels programs.

See 28 U.S.C. 2462.

results) that parties conduct to establish

a defense to downstream violations. All

parties in the gasoline distribution

system currently are required to keep

PTDs for RFG. However, since there are

no downstream CG standards under the

anti-dumping regulations, only refiners

and importers are required to retain

PTDs for conventional gasoline under

the current regulations. Because the

sulfur rule, like the RFG rule, includes

downstream standards, we believe that

a requirement to retain PTDs for all

parties in the gasoline distribution

system is appropriate under the sulfur

rule. The PTD information will help us

identify the source of any gasoline

found to be in violation of the sulfur

standards, and will provide downstream

parties with information regarding the

applicable downstream standard.

Parties are required to keep records

for a period of five years,151 with

additional requirements for records

pertaining to credits and allotments.

Records pertaining to credits or

allotments that were banked and never

transferred to another party are required

to be retained for five years after the

credits or allotments are used for

compliance purposes. Records

pertaining to credits or allotments that

were transferred are required to be

retained by the transferor for five years

after the year the credits or allotments

were transferred, and by the transferee

for five years after use.

We received comment that the

regulations should allow records to be

maintained in non-hard copy formats,

such as photographic or electronic

means. We do not believe that the

recordkeeping requirements, as

proposed, disallow the retention of

records in electronic or photographic

form. However, parties that

electronically generate and/or maintain

records must make available to EPA the

hardware and software necessary to

review the records, or if requested by

EPA, electronic records shall be

converted to paper documents.

The sulfur rule, like the RFG/CG rule,

requires regulated parties to keep the

results of tests conducted on the

gasoline. A number of parties previously

have asked EPA to clarify whether,

under the RFG/CG rule, this

recordkeeping requirement requires

parties to keep copies of all documents

that contain test results. To clarify what

the recordkeeping requirements require

with regard to test data, we proposed for

the RFG/CG rule to add language which

specifies that the test result as originally

printed by the testing apparatus is

required to be kept, or, where no printed

result is generated by the testing

apparatus, the results as originally

recorded by the person who performed

the tests. Today’s action incorporates

this clarification in the sulfur rule.

Under this provision, where the test

data is initially recorded into a database

system and there are no prior written

recordings of the data, the information

in the database system may serve as the

original record of the test data. The final

rule also specifies that any record that

contains results for a test that are not

identical to the results as originally

printed by the testing apparatus or

recorded by the person who performed

the test must also be kept. Although this

language was not included in the

NPRM, we have concluded it is a logical

outgrowth of the proposal regarding

recordkeeping for test data, and that it

will make the regulation clearer with

regard to this requirement. As a result,

it is appropriate to include this language

in the final rule.

3. Reporting Requirements

Refiners and importers will be

required to submit an annual report that

demonstrates compliance with the

applicable sulfur standards and data on

individual batches of gasoline,

including batch volume and sulfur

content. The rule requires that refiners

and importers report on the generation,

use and transfer of credits and

allotments. The RFG/CG programs

contain similar reporting requirements.

Based on our experience with these

programs, we believe that requiring an

annual sulfur report and batch

information will provide an appropriate

and effective means of monitoring

compliance with the average standards

under the sulfur program. The batch

data also will serve to verify that each

batch of gasoline met the applicable

sulfur cap standard when it left the

refinery or import facility. The batch

data must also show which batches

were designated as GPA gasoline, as

appropriate.

For the 2004 and 2005 annual

averaging periods, refiners will be

required to submit a report for the

refiner’s gasoline production (RFG and

conventional gasoline) for all refineries

during the averaging period, which

demonstrates compliance with the

applicable corporate average and pergallon cap standards. For the 2005

annual averaging period, refiners will

also be required to submit a separate

report for each refinery, which

demonstrates compliance with the

refinery average standard. For the 2004

and 2005 annual averaging periods,

importers will be required to submit a

report for all of the gasoline they import

during the averaging period, which

demonstrates compliance with the

applicable corporate average and pergallon cap standards. The importer’s

report for 2005 must also demonstrate

compliance with the refinery average

(30 ppm) standard. Any refiner who is

also an importer must aggregate the

refining and importing activities for the

purpose of demonstrating compliance

with the applicable corporate average

standards. Importers of gasoline

produced by foreign refiners with

individual baselines have additional

reporting requirements. For the 2006

averaging period and beyond, corporate

average reports are no longer required

for either refiners or importers. Refiners

will be required to submit an annual

report for each refinery (importers for

the gasoline they import), which

demonstrates compliance with the

refinery average and per-gallon cap

standards. Refiners or importers

producing both GPA gasoline and

gasoline for the remainder of the

country, must separately report

compliance with the different standards.

Annual reports, on forms provided by

the Agency, must be received by EPA by

the last day of February for the prior

calendar year.

The annual reports will also provide

a vehicle for accounting for any sulfur

allotments or credits created, sold or

used to achieve compliance during the

averaging period. (See Section IV.C. for

a discussion of the sulfur allotment and

ABT credit programs.) Each refiner or

importer choosing to participate in the

ABT program will be required to report

to the Agency on an annual basis

(refiners for each refinery, and importers

for the gasoline they import) the

applicable sulfur baseline and the

annual average gasoline sulfur level

produced at that refinery or by that

importer (in ppm sulfur) during the

averaging period. Credit calculations

will be reported, along with an

accounting of credits banked, used,

traded, acquired or terminated. The

credits will be in units of ppm-gallons.

The identity of the refiners/refineries

and importers involved in these

transactions will be reported, along with

the registration numbers assigned to

them by the Agency under the RFG/CG

program (40 CFR 80, subparts D, E, and

F).

For years 2000 through 2003, parties

who generate early ABT credits will be

required to report information relating

to the generation of these credits. These

early credit reports will only cover

credits banked and traded. Beginning in

2004 and beyond, refiners and importers

6812 Federal Register / Vol. 65, No. 28 / Thursday, February 10, 2000 / Rules and Regulations

152See section 80.5 (penalties for fuels

violations); section 80.23 (liability for lead

violations); section 80.28 (liability for volatility

violations); section 80.30 (liability for diesel

violations); section 80.79 (liability for violation of

RFG prohibited acts); section 80.80 (penalties for

RFG/CG violations).

153An additional type of liability, vicarious

liability, is also imposed on branded refiners under

these fuels programs.

who generate and/or use ABT credits

will be required to submit information

relating to the generation and use of the

credits as part of their annual

compliance reports, including any

credit debit that is carried over to the

subsequent year. For each purchase of

ABT credits, as reported on the buyer’s

annual report, there must be a

corresponding entry on the seller’s

annual report. The annual report must

also indicate any credits that are used to

achieve compliance with the refinery

average standard.

As discussed above, during the 2004

and 2005 annual averaging periods,

refiners for the combined production

from all their refineries, and importers

for the gasoline they import, will also be

required to demonstrate compliance

with the applicable corporate average

standard. In addition, refiners and

importers must demonstrate compliance

with the requirements for the

generation, use, transfer and termination

of allotments. Refiners and importers

who trade sulfur allotments to meet the

corporate average standard will be

required to submit information relating

to these transactions. All sulfur

allotment transactions must be

concluded by the last day of February of

the calendar year following the year the

allotments were used to meet the

corporate average. Information relating

to such transactions, including the

identity of the refiners and importers

involved in the transactions and their

EPA registration numbers, must be

reported by both parties to the

transaction as part of their annual

compliance reports.

As discussed in Section IV.C., above,

parties that only blend oxygenates into

gasoline are not treated as refiners under

the sulfur rule, and, as a result, are not

subject to the reporting requirements

under § 80.370.

Refiners and importers are also

required to arrange for a certified public

accountant or certified internal auditor

to conduct an annual review of the

company’s records that form the basis of

the annual sulfur compliance report

(called an ‘‘attest engagement’’). The

purpose of the attest engagement is to

determine whether representations by

the company are supported by the

company’s internal records. Attest

engagements are already required under

the RFG/CG regulations. The refiner’s

attest engagement under the RFG/CG

rule partially encompasses sulfur rule

compliance since the attest auditors are

already required to verify sulfur results

for both CG and RFG. However, the

RFG/CG attest engagements do not

require the attest auditor to review

sulfur credit generation, credit

purchases, credit trading or small

refiner issues. Because of the

complexity of the sulfur credit program

and small refiner program, sulfur attest

engagement provisions have been

adopted by today’s rule that require the

attest auditor to review sulfur credit

generation, credit trading, credit

purchasing, credit selling, corporate

pool averaging, and small refiner issues.

Consistent with the RFG regulations, the

attest reports for sulfur are to be

included in the presently required attest

engagement submitted by May 31 of

each year.

G. Exemptions for Research,

Development, and Testing

The final rule provides for an

exemption from the sulfur requirements

for gasoline used for research,

development and testing purposes. We

recognize that there may be legitimate

research programs that require the use

of gasoline with higher sulfur levels

than those allowed under the sulfur

rule. As a result, the final rule includes

provisions for obtaining an exemption

from the prohibitions for persons

distributing, transporting, storing,

selling or dispensing gasoline that

exceeds the standards, where such

gasoline is necessary to conduct a

research, development or testing

program. Parties are required to submit

to EPA an application for exemption

that describes the purpose and scope of

the program and the reasons why use of

the higher sulfur gasoline is necessary.

In approving any application, EPA will

impose reasonable conditions such as

recordkeeping, reporting, volume

limitations and possible requirements to

repair vehicles.

We received comment that the

regulations should clarify that suppliers

of gasoline used for R&D purposes are

exempt from the prohibitions and

penalties under the sulfur rule. To

clarify this point, we have added a

provision which explicitly states that

gasoline subject to an R&D exemption is

exempt from the provisions of subpart

H, so long as the gasoline is used in a

way that complies with the terms of the

memorandum of exemption. If the R&D

exemption is shown to be based on false

information or is not properly

maintained, parties will be liable for

violations of the provisions under

subpart H regarding any gasoline

covered under the exemption.

We also received comment that the

regulations should ensure that vehicles

which have been used for testing with

high sulfur test fuels are not later

returned to the general fleet, or if they

are, the vehicles should be required to

be restored to their original condition.

EPA agrees that it would be improper to

permit such vehicles to be used in

general use if their emission controls

have been rendered inoperative through

fueling with high sulfur gasoline. This

issue may be effectively addressed

through the anti-tampering

requirements of section 203(a)(3) of the

Clean Air Act, 42 U.S.C. § 7522(a)(3),

and is also addressed in today’s rule,

which provides the Administrator with

the power to include appropriate

conditions when granting R&D

exemptions.

H. Liability and Penalty Provisions for

Noncompliance

The liability and penalty provisions

under the sulfur rule are similar to the

liability and penalty provisions of the

RFG and other fuels regulations.152

Regulated parties will be liable for

committing certain prohibited acts, such

as selling or distributing gasoline that

does not meet the sulfur standards, or

causing others to commit prohibited

acts. In addition, parties will be liable

for a failure to meet certain affirmative

requirements, such as the recordkeeping

or PTD requirements, or causing others

to fail to meet such requirements.

The sulfur rule, like other EPA fuels

regulations, includes a presumptive

liability scheme for violations of

prohibited acts. Under this approach,

the party in the gasoline distribution

system that controls the facility where

the violation occurred, and other parties

in that gasoline’s distribution system

(such as the refiner, reseller, and

distributor), are presumed liable for the

violation.153 The sulfur rule explicitly

includes causing another person to

commit a prohibited act and causing the

presence of non-conforming gasoline to

be in the distribution system as

prohibitions. The final rule clarifies that

causing the presence of non-conforming

gasoline to be in the distribution system

includes gasoline that does not conform

to the applicable average standard, as

well as gasoline that does not conform

to the cap standard. Affirmative

defenses are provided for each party

that is deemed presumptively liable for

a violation, and all presumptions of

liability are refutable. The defenses

under the sulfur rule are similar to those

Federal Register / Vol. 65, No. 28 / Thursday, February 10, 2000 / Rules and Regulations 6813

available to parties for violations of the

RFG regulations.

The final sulfur rule, like the

proposal, applies the provisions of

section 211(d)(1) of the Clean Air Act

(Act) for the collection of penalties. The

penalty provisions subject any person

who violates any requirement or

prohibition of the sulfur rule to a civil

penalty of up to $27,500 for every day

of each such violation and the amount

of economic benefit or savings resulting

from the violation. A violation of the

applicable average sulfur standard

constitutes a separate day of violation

for each day in the averaging period. A

violation of a sulfur cap standard

constitutes a separate day of violation

for each day the gasoline giving rise to

the violation remained in the gasoline

distribution system. The length of time

the gasoline in question remained in the

distribution system is deemed to be

twenty-five days unless there is

evidence that the gasoline remained in

the gasoline distribution system for

fewer than or more than twenty-five

days. The penalty provisions are similar

to the penalty provisions for violations

of the RFG regulations.

After consideration of the comments

received, the Agency is adopting

regulations that specify the regulated

parties who may be subject to liability

for causing a violation of the sulfur rule.

As proposed, the regulation would have

applied to any person, not limited to the

parties in the gasoline distribution

system whose actions could logically

have caused the nonconformity. This

provision would have potentially

broadened the range of liable parties

under the sulfur rule beyond the range

established under other fuel programs.

EPA believes that the presumptive

liability schemes of current fuels

regulations have generally been effective

and finds no compelling reason to apply

the regulatory provision at issue to ‘‘any

person’’ rather than to specific parties.

Therefore, in the final sulfur rule, the

liability sections for the causation

violations will specify the regulated

parties subject to the liability, and will

not encompass unspecified parties. The

final rule clarifies that oxygenate

blenders are among the specified parties

potentially subject to liability. Today’s

final rule also clarifies that parent

corporations are liable for violations of

subsidiaries. This is consistent with our

interpretation of the RFG rule, as stated

in the RFG and Anti-dumping Question

and Answer document. Finally, the final

rule clarifies that each partner to a joint

venture will be jointly and severally

liable for the violations at a joint

venture facility or by a joint venture

operation.

We received several comments on the

proposal. Some commenters believe that

the Act does not authorize EPA to

establish prohibitions against causing

another person to commit a prohibited

act or causing the presence of nonconforming gasoline to be in the

distribution system. These commenters

believe that these prohibitions are a

departure from the liability scheme

under the existing fuels regulations and

that they constitute double jeopardy by

imposing liability for multiple

violations for a single act. The

commenters also believe that imposing

liability for causing another person to

commit a prohibited act extends the

limits that Congress placed on liability

under section 211 of the Act, since

sections 211(d) and 211(k)(5) do not

expressly mention imposing liability for

causing another person to violate

regulations. The commenter also noted

that, had Congress intended for such

actions to be prohibited, it could have

expressly included such a prohibition in

section 211. This commenter cites

section 211(g) as an example of a

statutory provision with such a

prohibition. One commenter said that,

rather than clarify the presumptive

liability scheme, the rule provides no

guidance regarding what it means to

cause someone to violate a prohibition

or cause non-conforming gasoline to be

in the distribution system. A commenter

also stated that these proposed

prohibitions are unnecessary, since EPA

has issued violations to multiple parties

under current fuels regulations.

EPA disagrees with the comment that

the sulfur rule’s proposed liability

scheme is a marked departure from the

liability schemes typically found in the

other fuels programs promulgated

pursuant to section 211 of the Act and

with the comment that the regulations

constitute double jeopardy (the double

jeopardy issue is addressed in the

Response to Comment document). The

majority of these programs, including

the proposed sulfur rule, contain

presumptive liability enforcement

structures which impose liability on

parties who, through their actions,

could logically have caused the fuel

nonconformity. The sulfur rule’s

presumptive liability scheme is thus

consistent with the liability schemes of

typical prior fuels programs. While EPA

has issued notices of violations to

multiple parties for violations under

current fuels regulations, the Agency

believes it is appropriate to clarify that

the act of causing another party to

violate the regulations is a prohibited

act. Therefore, the regulatory language

in the sulfur regulations explicitly

addresses this issue.

EPA also disagrees with the comment

that this provision is inconsistent with

Section 211(d) of the Act because

Section 211(d) does not mention

imposing liability for causing another

person to violate the regulations

promulgated under Section 211(c). For

the reasons described above, EPA is

adopting a provision in today’s

regulations that prohibits causing

another entity to violate the standards.

This prohibition is a reasonable exercise

of EPA’s discretion under Section

211(c), and the penalty provision of

Section 211(d) apply to violations of the

prohibition. The fact that Section 211(d)

does not specifically mention causing

another person to violate the regulations

is therefore irrelevant, such action is

itself a violation of the regulations.

Moreover, Section 211(d) does not

mention any specific violations for

which penalties may be assessed, but

rather states generally that violations

shall result in penalties. Thus, the

absence of specific mention of causing

another entity to violate the regulations

is irrelevant, since all other specific

prohibitions in regulations subject to

Section 211(d) penalties are similarly

not mentioned.

The Agency also disagrees with the

comment that the Clean Air Act does

not give EPA the authority to establish

causation violations under the sulfur

rule. We believe that the Act gives us

ample authority to categorize the sulfur

rule’s causative acts, i.e., the causing of

another party to commit a violation, and

the causing of nonconforming gasoline

to be present in the distribution system,

as prohibited acts. Section 211(c) of the

Act authorizes the Agency to

promulgate regulations for the purpose

of prohibiting or controlling the

manufacture, introduction into

commerce, sale, or offering for sale of

fuels or fuel additives where the fuel or

additive causes or contributes to air

pollution which may reasonably be

anticipated to endanger public health or

welfare, or where the fuel or additive

will impair to a significant degree the

performance of emission control devices

that are or will be in general use.

Today’s gasoline sulfur rule is

promulgated pursuant to this authority.

Section 211(c) gives EPA broad

discretion to fashion regulations to

control or prohibit the manufacture,

introduction into commerce, sale, or

offering for sale of fuels once the

Agency has made the requisite findings

regarding contribution to harmful air

pollution or impairment of vehicle

emissions control system performance.

This includes the discretion to adopt

6814 Federal Register / Vol. 65, No. 28 / Thursday, February 10, 2000 / Rules and Regulations

reasonable regulatory provisions that are

necessary and appropriate to ensure that

the controls or prohibitions are

effective. To effectively regulate sulfur

in gasoline under section 211, it is

necessary for the Agency to regulate the

actions of those parties who do the

manufacturing, introducing into

commerce, and selling of gasoline

subject to the sulfur requirements.

When one or several of these

regulated parties causes another

regulated party to violate the rule (or

causes nonconforming gasoline to be

present in the system), such an act

could logically result in the high sulfur

gasoline contributing to harmful air

pollution or to the impairment of

vehicle emission control device

performance, which are the adverse

impacts that legislative authority under

section 211(c) was created to control.

Examples of such upstream causative

acts include the scenario where a refiner

produces high sulfur gasoline which it

sells to a distributor. That distributor

then resells the nonconforming product

to a variety of retail outlets which, in

their turn, also violate the rule by

selling the high sulfur gasoline to

owners of motor vehicles. Another

example occurs where a distributor has

created high sulfur gasoline by blending

high sulfur blendstock into his gasoline.

This distributor then makes several

different sales of this noncomplying

product to a variety of retail outlets,

which, in their turn, also violate the rule

by selling the product to numerous

motor vehicle owners. A third upstream

causation scenario could occur if several

refiners happen to make nonconforming

gasoline. Each then sells its

nonconforming product to a different

distributor, and a retail outlet which is

a customer of both distributors,

purchases some of the noncomplying

gasoline from both distributors. The

retailer then commits a violation by

offering this product for sale to its

customers.

In some cases, an upstream action has

more severe environmental impacts

through causing a downstream violation

than would occur if the violation was

corrected upstream. For example, a

refiner may violate the sulfur

regulations by shipping gasoline that

exceeds the applicable standards when

it leaves the refinery. If that violation is

corrected before the gasoline reaches the

retail outlets, the adverse environmental

impacts could be mitigated or avoided.

However, if the refiner’s violation is not

corrected and ultimately causes a

number of violations of the standards at

retail outlets, the environmental impact

would be more severe, since high sulfur

gasoline would be introduced into

vehicles and impair catalyst

performance. Therefore, it is reasonable

to consider causing a downstream

violation by another party to be a

separate violation, since an upstream

party’s actions can have more severe

environmental consequences if they

cause downstream parties to violate

applicable requirements. For these

reasons, it is reasonable to conclude that

section 211(c) authorizes the Agency to

prohibit and control such causative acts

in order to ensure that gasoline

ultimately introduced into vehicles

meets the low sulfur standards.

Our approach is also reasonable under

section 211(c) even though section

211(c) does not expressly prohibit

causing another party to violate

standards adopted under this

subsection. In fact, section 211(c) itself

does not contain any express

prohibitions, but rather provides EPA

authority to regulate fuels and fuel

additives, based on certain findings. In

contrast, other provisions of section 211,

such as section 211(g), do include

express prohibitions against certain

actions. Thus, under section 211(g), the

specified actions are prohibited even in

the absence of EPA adopting regulations

to codify the prohibitions. In section

211(g), Congress indicated a clear intent

to prohibit a specific action

(misfueling), without requiring EPA to

adopt regulations to implement that

prohibition. However, section 211(c)

authorizes EPA to establish regulations

with certain controls and prohibitions,

and, as described above, EPA has the

discretion to adopt reasonable measures

to ensure that the requirements of such

regulations are met.

Moreover, the commenters’ assertion

that this provision is inconsistent with

other subsections of section 211 of the

Act is misplaced. First, while the sulfur

standards do apply to all gasoline,

including gasoline subject to the

reformulated gasoline requirements, the

sulfur standards are being adopted

pursuant to EPA’s authority under

section 211(c)(1), not under section

211(k). Therefore, section 211(k)(5)’s

prohibitions, which describe actions

that are violations of section 211(k), are

not relevant to the sulfur standards. In

addition, the enumeration of specific

prohibitions in section 211(k) does not

mean that EPA may establish no other

prohibited acts with respect to

reformulated gasoline; rather, it simply

identifies certain actions that ‘‘shall be’’

violations of section 211(k), but does not

preclude establishment of other

appropriate prohibited acts pursuant to

EPA’s authority under the Act.

The Agency also disagrees with the

argument that the proposed causation

violations under the sulfur rule would

impose unjustifiable, multiple liability

for the commission of a single

prohibited act. The Agency is generally

not in the best position to know the

exact cause of a gasoline nonconformity

since so many parties and actions are

involved with the sale and transfer of

the gasoline. Therefore, for effective

enforcement, we must have the ability

to assert the liability of all the parties in

the system who were connected with

the nonconforming gasoline because

they each could have caused the

violation. Similarly, we must also have

the ability to assert upstream liability

for the full number of downstream

violations a party may be responsible for

causing, even if the multiple

downstream violations may all

ultimately be found to stem from one

gasoline sale or transfer on the part of

the upstream party. The enforcement

possibility exists that the separate

downstream violations may each have

stemmed from separate actions by that

party.

Any party may rebut the presumption

of liability for each asserted violation by

establishing through affirmative

defenses that it did not cause the

violation. Moreover, any party against

whom EPA institutes an enforcement

action may raise equitable factors about

its own conduct as part of settlement of

the violation enforcement action. In

settling fuels matters, the Agency

typically takes into account such

matters as the volume of nonconforming

product that a party was connected

with, and the severity and the amount

of proscribed activity that the party was

actually involved with in causing the

violation. We do not believe that either

the sulfur rule’s liability scheme or its

future implementation will be arbitrary

or unjustified.

To further alleviate commenters’

concern about potential liability for

multiple violations under the sulfur

rule, we want to clarify that the Agency

does not ordinarily attempt to collect

separate penalties from an entity for

the array of possible standard violations

(e.g., both for the manufacturing and the

selling of noncomplying product), that a

party might be liable for in respect to

the same gasoline. In addition, we do

not intend to seek penalties from a

single party for violating regulatory

standard requirements while also

seeking penalties for that party’s causing

of other entities to violate regulatory

standard requirements, where both

violations involve the same gasoline,

unless very unusual circumstances exist

which would warrant such action, such

as egregious conduct on the part of the

party.

Federal Register / Vol. 65, No. 28 / Thursday, February 10, 2000 / Rules and Regulations 6815

In a similar fashion, we do not expect

to collect penalties from one party for

both types of causation violations for

the same amount of gasoline under

normal circumstances. A primary

Agency purpose in defining the

causation violations as two separate

prohibited acts (i.e., causing another to

commit a violation, and causing the

presence of nonconforming product in

the distribution system), was not to

collect a double penalty, but to address

different scenarios of evidence

collection. For example, if the Agency

finds a sulfur rule standard violation in

a sample from a retail outlet supplied by

a certain distributor, but we do not have

a nonconforming sample from the

distributor, the evidence would most

easily permit us to assert that the

distributor was responsible for causing

the retailer violation that we do have

evidence for. It is reasonable for us to

assert the causation violation against the

distributor in spite of our lack of a

sample from the distributor, because

any distributor who transfers gasoline to

a retailer, which gasoline is found to be

noncompliant, could logically have

caused the noncompliance of the

gasoline when it was under the

distributor’s control, such as by

blending high sulfur blendstock into the

gasoline.

On the other hand, if we have a

violation sample from a distributor, but

no samples from its downstream

customers, we may assert that the

distributor caused the presence of

nonconforming gasoline in the

distribution system, rather than assert

that the distributor caused another party

to sell nonconforming product, since we

don’t have a nonconforming sample

from another party’s facility. It would be

reasonable for us to assert that the

distributor caused the presence of

nonconforming gasoline in the

distribution system since we do have a

sample of nonconforming gasoline from

the distributor, and provided also that

there is evidence that the distributor

had sold, transferred, etc. this product

to downstream customers.

In summary, the Agency intends to

enforce the liability scheme of the sulfur

rule in the same reasonable manner that

we have enforced the similar liability

schemes in our prior fuels regulations.

This does not include attempting to

penalize a party for multiple variations

of noncompliance in regard to the same

gasoline unless unusual circumstances

make such action appropriate.

I. How Will Compliance With the Sulfur

Standards Be Determined?

We have often used a variety of

evidence to establish non-compliance

with the requirements imposed under

our current fuels regulations. Test

results of the content of gasoline have

been used to establish violations, both

in situations where the sample has been

taken from the facility at which the

violation occurred, and where the

sample has been obtained from other

parties’ facilities when such test results

have had probative value of the

gasoline’s characteristics at points

upstream or downstream. The Agency

has also commonly used documentary

evidence to establish non-compliance or

a party’s liability for non-compliance.

Typical documentary evidence has

included PTDs identifying the gasoline

as inappropriate for the facility it is

being delivered to, or identifying parties

having connection with the noncomplying gasoline.

EPA proposed that compliance with

the sulfur standards would be

determined based on the sulfur level of

the gasoline, as measured using the

regulatory testing methodologies. We

further proposed that any evidence from

any source or location could be used to

establish the gasoline sulfur level,

provided that such evidence is relevant

to whether the level would have been in

compliance if the regulatory sampling

and testing methodology had been

correctly performed. In today’s action,

EPA is adopting the proposed regulatory

provision.

Several commenters interpreted this

proposed language as evidencing the

Agency’s intent to make all evidence,

including evidence not derived from

regulatory test methods, equal in

probative value to that from the

regulatory test methods. One commenter

also stated that the proposed provision

is inconsistent with other parts of the

proposal because it undercuts the

benefits of having clearly defined

regulatory test methodologies. EPA

disagrees that the regulatory language

indicates such an intent, or has such an

effect. The regulations provide that

compliance with the standards is to be

determined using specified test

methodologies. While other information

may be used, including test results

using different test methods, such other

information may only be used if it is

relevant to determining whether the

sulfur level would meet applicable

standards had compliance been

properly measured using the specified

test methodologies. Thus, the regulation

adopted today does not result in a

situation where any and all evidence

carries equal weight in an enforcement

action. In fact, the regulation establishes

the regulatory test method as the

standard against which other evidence

is measured. Moreover, since any

evidence other than regulatory test

results must be relevant to compliance

using the test method, EPA disagrees

with the commenter who stated that the

validity of the sulfur standards can be

challenged in any enforcement action

because neither EPA nor regulated

entities will be able to rely on

measurements taken using the

regulatory test methods. Rather than

causing more confusion regarding

compliance with the standard, this

provision clarifies that the regulatory

test method defines compliance, since

other evidence can only be used if it

relates to compliance using that test

method.

The following is an example of how

the Agency believes evidence of

standard non-compliance not based on

regulatory test results might be used for

compliance purposes under today’s rule

provisions. Under a first scenario, the

Agency might not have sulfur results

derived from regulatory test methods for

a certain amount of gasoline sold by a

terminal, yet the terminal’s own test

results, based on testing using methods

other than those specified in the

regulations, show an exceedance of the

sulfur standard. Under the requirements

of today’s rule, the evidence from the

non-regulatory test method could only

be used to establish noncompliance if

the terminal’s test results are relevant to

the determination of the gasoline’s

sulfur level that would have resulted if

the regulatory test method had been

used. Thus, the Agency would have to

present evidence to link the results of

the alternative test method to sulfur

levels as measured using the regulatory

test method.

Another commenter has suggested

that, if the Agency decides to finalize a

‘‘credible evidence’’ provision, it use the

language in the current RFG regulations

which establishes a presumption that

the regulatory testing methods prevail,

except in exceptional circumstances.

Other commenters also opposed the

proposed provision in part because it

differs from that in EPA’s current fuels

regulations. As described above, EPA

believes that the provision adopted

today does not undercut the importance

of the regulatory testing methodologies,

since other evidence may be used only

as relevant to compliance as measured

using the regulatory methods. In

addition, as is consistent with the RFG

scheme, EPA believes it is appropriate

to use such other evidence even in some

circumstances where test results using

the regulatory test methods do exist, and

the provision adopted today clarifies

this. EPA also notes that it intends to

undertake rulemaking in the near future

to revise the current fuels regulations to

6816 Federal Register / Vol. 65, No. 28 / Thursday, February 10, 2000 / Rules and Regulations

154The commenter references section 211(k)(5) as

support for its assertion, but quotes language from

section 211(k)(4). EPA assumes that the commenter

intended to cite section 211(k)(4) rather than

section 211(k)(5).

include the same language for use of

other evidence as adopted today in the

final sulfur rule.

The provision adopted today also

clarifies that any probative evidence

obtained from any source or location

may be used to establish noncompliance with requirements other

than the sulfur standards, such as

recordkeeping requirements and

requirements to properly calculate

sulfur credits and averages, as well as to

establish which parties have facility

control or some other basis for liability

for sulfur rule non-compliance. Since

proof of these elements is not predicated

on establishing sulfur levels, whether or

not regulatory test methods are used is

not significant. Therefore commenters’

concern about the use of other evidence

undercutting the primacy of the

regulatory test methods is not germane

to this part of the regulation which is

not directed toward standards. This

provision is being included in the final

sulfur rule to clarify that this rule, as is

consistent with our interpretation of our

other fuels rules, contemplates the full

use of all relevant evidence to establish

non-standard violations and rule

liability.

EPA disagrees with the commenters

who stated that EPA lacks authority

under the Clean Air Act to permit the

use of any evidence of non-compliance

of the sulfur standards other than test

results using the regulatory test

methods. One commenter notes that the

only explicit reference in the Act to the

use of ‘‘credible evidence’’ is in section

113(e), which applies only to stationary

sources, and that neither section 211 nor

section 205 mention ‘‘credible

evidence.’’ Finally, the commenter

states that the proposed provision is

inconsistent with the directive of

section 211(k) that EPA determine

appropriate measures of and methods

for ascertaining the emissions of air

pollutants.

EPA disagrees with the comments

asserting that the Agency lacks authority

to promulgate this provision. While

section 113(e) does refer to ‘‘credible

evidence,’’ that provision is not relevant

to EPA’s action today. Moreover, the

absence of the explicit use of the term

‘‘credible evidence’’ in sections 205 and

211 does not compel a conclusion that

EPA lacks authority to allow the

consideration of relevant evidence in

determining compliance with the sulfur

standards. EPA believes that section

211(c) provides sufficient authority to

adopt such a provision. Section 211(c)

authorizes the Agency to promulgate

regulations for the purpose of

prohibiting or controlling the

manufacture, introduction into

commerce, sale, or offering for sale of

fuels or fuel additives where the fuel or

additive causes or contributes to air

pollution which may reasonably be

anticipated to endanger public health or

welfare, or where the fuel or additive

will impair to a significant degree the

performance of emission control devices

that are or will be in general use. As

described in other sections of this

preamble and in the RIA, today’s

regulation is promulgated pursuant to

this authority. Section 211(c) gives EPA

broad discretion to fashion regulations

to control or prohibit the manufacture,

introduction into commerce, sale, or

offering for sale of fuels once the

Agency has made the requisite findings

regarding contribution to harmful air

pollution or impairment of vehicle

emissions control system performance.

This includes the discretion to adopt

reasonable regulatory provisions that are

necessary and appropriate to ensure that

the controls or prohibitions are effective

and can be enforced.

To ensure the effectiveness and the

ability to adequately enforce the sulfur

standards, it is reasonable for EPA to

consider evidence other than actual test

results using the regulatory test method,

where such evidence can be related to

the test results. As described above, test

results using the regulatory test method

are often not available. In such

circumstances, it is reasonable to

consider other evidence of compliance,

such as test results using other methods

or commercial documents, if such

evidence can be shown to be relevant to

determining whether the gasoline would

meet the standard if tested using the

regulatory methods. This provision

would not permit the use of other

evidence that is not relevant to such a

determination, and is therefore

reasonably limited to allow for effective

enforcement, without creating

uncertainty about compliance.

Finally, EPA disagrees with the

commenter’s assertion that this

provision is inconsistent with section

211(k). First, while the sulfur standards

do apply to all gasoline, including

gasoline subject to the reformulated

gasoline requirements, the sulfur

standards are being adopted pursuant to

EPA’s authority under section 211(c)(1),

not under section 211(k). In any case,

the directive of section 211(k)(4) that

EPA determine through regulation

appropriate measures of and methods

for ascertaining the emissions of air

pollutants explicitly applies only for

purposes of section 211(k), and applies

for determining the emissions levels of

VOCs and toxic air pollutants from

baseline vehicles when operating on

baseline gasoline, as defined by section

211(k). Thus, the commenter’s reference

to section 211(k)(4) as inconsistent with

the provision adopted today is

misplaced, particularly in light of the

limited applicability of the language in

section 211(k)(4).154

As described in the NPRM, the

Agency frequently uses a variety of

evidence to establish compliance with

fuel programs’ regulatory requirements

and liability for non-compliance. Such

evidence has included test results

obtained from a variety of sources,

including bills of lading, delivery

records, manifests, and other

commercial documents. The compliance

determination provisions included in

today’s final rule are created to provide

the most effective Agency capability to

enforce the rule’s requirements.

VII. Public Participation

A wide variety of interested parties

participated in the rulemaking process

that culminates with this final rule. The

formal comment period and four public

hearings associated with the NPRM

provided additional opportunities for

public input. EPA also met with a

variety of stakeholders, including

environmental and public health

organizations, oil company

representatives, auto company

representatives, emission control

equipment manufacturers, and states at

various points in the process.

We have prepared a detailed

Response to Comments document that

describes the comments received on the

NPRM and presents our response to

each of these comments. The Response

to Comments document is available in

the docket for this rule and on the Office

of Mobile Sources internet home page.

Comments and our responses are also

included throughout this preamble for

several key issues.

VIII. Administrative Requirements

A. Administrative Designation and

Regulatory Analysis

Under Executive Order 12866 (58 FR

51735, Oct. 4, 1993), the Agency is

required to determine whether this

regulatory action would be ‘‘significant’’

and therefore subject to review by the

Office of Management and Budget

(OMB) and the requirements of the

Executive Order. The order defines a

‘‘significant regulatory action’’ as any

regulatory action that is likely to result

in a rule that may:

Federal Register / Vol. 65, No. 28 / Thursday, February 10, 2000 / Rules and Regulations 6817

155The Final RFA is contained in Chapter 8 of the

Regulatory Impact Analysis.

156Report of the Small Business Advocacy Panel

on Tier 2 Light-Duty Vehicle and Light-Duty Truck

Emission Standards, Heavy-Duty Gasoline Engine

Standards, and Gasoline Sulfur Standards, October

1998.

• Have an annual effect on the

economy of $100 million or more or

adversely affect in a material way the

economy, a sector of the economy,

productivity, competition, jobs, the

environment, public health or safety, or

State, local, or tribal governments or

communities;

• Create a serious inconsistency or

otherwise interfere with an action taken

or planned by another agency;

• Materially alter the budgetary

impact of entitlements, grants, user fees,

or loan programs or the rights and

obligations of recipients thereof; or,

• Raise novel legal or policy issues

arising out of legal mandates, the

President’s priorities, or the principles

set forth in the Executive Order.

Pursuant to the terms of Executive

Order 12866, EPA has determined that

this final rule is a ‘‘significant regulatory

action’’ because the vehicle standards,

gasoline sulfur standards, and other

regulatory provisions, if implemented,

would have an annual effect on the

economy in excess of $100 million.

Accordingly, we have prepared a Final

Regulatory Impact Analysis (RIA) which

is available in the docket for this

rulemaking and at the internet address

listed under ADDRESSES above. This

action was submitted to the Office of

Management and Budget (OMB) for

review as required by Executive Order

12866. Any written comments from

OMB on today’s action and any

responses from EPA to OMB comments

are in the public docket for this

rulemaking.

B. Regulatory Flexibility

The Regulatory Flexibility Act, 5

U.S.C. 601–612, was amended by the

Small Business Regulatory Enforcement

Fairness Act of 1996 (SBREFA), Public

Law 104–121, to ensure that concerns

regarding small entities are adequately

considered during the development of

new regulations that affect them. EPA

has identified industries subject to this

rule and has provided information to,

and received comment from, small

entities and representatives of small

entities in these industries. We have

prepared a Final Regulatory Flexibility

Analysis (RFA) to evaluate the

economic impacts of today’s proposal

on small entities.155 The key elements of

the RFA include:

• The number of affected small

entities;

• The projected reporting, record

keeping, and other compliance

requirements of the proposed rule,

including the classes of small entities

that would be affected and the type of

professional skills necessary for

preparation of the report or record;

• Other federal rules that may

duplicate, overlap, or conflict with the

proposed rule; and

• Any significant alternatives to the

proposed rule that accomplish the

stated objectives of applicable statutes

and that minimize significant economic

impacts of the proposed rule on small

entities.

The Agency convened a Small

Business Advocacy Review Panel (the

Panel) under section 609(b) of the

Regulatory Flexibility Act as added by

SBREFA. The purpose of the Panel was

to collect the advice and

recommendations of representatives of

small entities that could be affected by

today’s proposed rule and to report on

those comments and the Panel’s

findings as to issues related to the key

elements of the Regulatory Flexibility

Analysis under section 603 of the

Regulatory Flexibility Act. The report of

the Panel has been placed in the docket

for this rulemaking.156

The contents of today’s final rule and

the Final Regulatory Flexibility Analysis

reflect the recommendations in the

Panel’s report. We summarize our

outreach to small entities and our

responses to the recommendations of

the Panel below.

1. Potentially Affected Small Businesses

The Regulatory Flexibility Analysis

identifies small businesses from the

industries in the following table as

subject to the provisions of today’s rule:

TABLE VIII.1.—INDUSTRIES CONTAINING SMALL BUSINESSES POTENTIALLY AFFECTED BY TODAY’S RULE

Industry NAICSa codes SIC b codes Defined by SBA as a small business if: c

Motor Vehicle Manufacturers ....................................... 336111 3711 < 1000 employees.

336112

336120

Alternative Fuel Vehicle Converters ............................. 336311 3592 < 500 employees.

541690 8931

336312 3714 < 750 employees.

422720 5172 < 100 employees.

454312 5984 7549 < $5 million annual sales.

811198 8742

541514

Independent Commercial Importers of Vehicles and

Vehicle Components.

811112 7533

7549

< $5 million annual sales.

811198 8742

541514

Petroleum Refiners ....................................................... 324110 2911 < 1500 employees.

Petroleum Marketers and Distributors .......................... 422710 5171 5172 < 100 employees.

422720

a North American Industry Classification System.

bStandard Industrial Classification system.

cAccording to SBA’s regulations (13 CFR 121), businesses with no more than the listed number of employees or dollars in annual receipts are

considered ‘‘small entities’’ for purposes of a regulatory flexibility analysis.

The Final RFA identifies about 15

small petroleum refiners, several

hundred small petroleum marketers,

and about 15 small certifiers of covered

vehicles (belonging to the other

categories in the above table) that would

be subject to the rule.

6818 Federal Register / Vol. 65, No. 28 / Thursday, February 10, 2000 / Rules and Regulations

157The information collection requirements

associated with the amendments to the

requirements for vehicle certification are contained

in the Information Collection Request entitled

‘‘Amendments to the Reporting and Recordkeeping

Requirements for Motor Vehicle Certification Under

the Tier 2 Rule’’, OMB No. 2060–0114, EPA ICR #

783.40.

2. Small Business Advocacy Review

Panel and the Evaluation of Regulatory

Alternatives

The Small Business Advocacy Review

Panel was convened by EPA on August

27, 1998. The Panel consisted of

representatives of the Small Business

Administration (SBA), the Office of

Management and Budget (OMB), and

EPA. During the development of the

proposal, EPA and the Panel were in

contact with representatives from the

small businesses that would be subject

to the provisions of the rule. In addition

to verbal comments from industry noted

by the Panel at meetings and

teleconferences, we received written

comments from each of the affected

industry segments or their

representatives. These comments,

alternatives suggested by the Panel to

mitigate adverse impacts on small

businesses, and issues the Panel

requested EPA take additional comment

on are contained in the report of the

Panel and are summarized below.

Today’s final rule incorporates the

major recommendations of the Panel.

Fuel-Related Small Business Issues

Most of the small refiners stated that

if they were required to achieve 30 ppm

sulfur levels on average with an 80 ppm

per-gallon cap without some regulatory

relief, they would be forced out of

business. Thus, the Panel devoted much

attention to regulatory alternatives to

address this concern. Most small

refiners strongly supported delaying

mandatory compliance for their

facilities. On the other hand, most small

refiners stated that a phase-in of

gasoline sulfur standards would not be

helpful because it would be more costeffective for them to install the

maximum technology required for the

most stringent sulfur levels that would

ultimately be imposed.

The Society of Independent Gasoline

Marketers of America (SIGMA)

commented that EPA should consider

giving relief not only to refiners that

meet the SBA definition of small refiner

but also to refineries with relatively

small production capacity that are

owned by large refining companies.

This was because a refinery with a small

production capacity would operate

essentially as an SBA-defined small

refiner would. SIGMA also noted that

small gasoline marketers would be

affected by the closure of any refinery

with small production capacity,

whether it was owned by a large

company or an SBA-defined small

refining company.

The Panel recommended that small

refiners be given a four to six year

period of relief during which less

stringent gasoline sulfur requirements

would apply. The Panel also advised

that EPA specifically request comment

on an alternative duration of ten years

for the relief period. Small refiners

would be assigned interim sulfur

standards during this relief period based

on their current individual refinery

sulfur levels. Following this relief

period, small refiners would be required

to meet the industry-wide standard,

although temporary hardship relief

would be available on a case-by-case

basis. The Panel concluded that

additional time provided to small

refiners before compliance with the

industry-wide standard was required

would allow (1) new sulfur-reduction

technologies to be proven-out by larger

refiners, (2) the costs of advanced

technology units to drop as the volume

of their sales increases, (3) industry

engineering and construction resources

to be freed-up, and (4) the acquisition of

the necessary capital by small refiners.

The Panel also concluded that adding

gasoline sulfur to the fuel parameters

already being sampled and tested by

gasoline marketers would likely result

in little, if any, additional burden.

Therefore, the Panel did not recommend

any special provision for gasoline

marketers.

EPA’s final action on this issue

closely follows the Panel’s

recommendations. You can find a

description of the small refiner

provisions of today’s final rule in

Section IV.C.2. above. Comments and

our responses on related issues are

collected in the Response to Comments

document.

Vehicle-Related Small Business Issues

Independent commercial importers of

vehicles (ICIs) suggested that the new

emissions standards be phased-in with

the phase-in schedule based on the

small vehicle manufacturer’s annual

production volume. Secondly, the ICIs

requested that small testing laboratories

be permitted to use older technology

dynamometers than proposed for use by

the Agency. Finally, the ICIs

commented that the certification

process should be waived for certain

foreign vehicles. Small-volume vehicle

manufacturers (SVMs) stated that a

phase-in of Tier-2 emissions standards

is essential. They further stated that

SVMs should not be required to comply

until the end of the phase-in period,

which should not be before model year

2007. The SVMs also stated that a caseby-case hardship relief provision should

be provided for their members. SVMs

requested that a credit program be

established with incentives for larger

manufacturers to make credits available

to SVMs in meeting their compliance

goals.

Based on the above comments, the

Panel advised that EPA consider several

alternatives, individually or in

combination, for the potential relief that

they might provide to small certifiers of

vehicles.

The Final Regulatory Flexibility

Analysis evaluates the financial impacts

of the proposed vehicle standards and

fuel controls on small entities. EPA

believes that the regulatory alternatives

incorporated in today’s final rule will

provide substantial relief to small

business from the potential adverse

economic impacts of complying with

today’s proposed rule.

C. Paperwork Reduction Act

The information collection

requirements (ICRs) associated with

today’s rule belong to two distinct

categories: (1) those that pertain to

amendments to the vehicle certification

requirements, and (2) those that pertain

to requirements for the control of

gasoline sulfur content. These

information collection requirements are

contained in two separate ICR

documents according to the category to

which they belong.

The ICR in this final rule that pertains

to the amendments to the vehicle

certification requirements has been

submitted for approval to the Office of

Management and Budget (OMB) under

the Paperwork Reduction Act, 44 U.S.C.

3501 et seq. Copies of this ICR157 can

be obtained from Sandy Farmer, Office

of Environmental Information,

Collections Strategy Division, U.S.

Environmental Protection Agency (Mail

Code 2822), 401 M Street, SW,

Washington, D.C. 20460, or by calling

(202) 260–2740. Please refer to ICR

#783.40 in any correspondence. Copies

may also be downloaded from the

internet at http://www.epa.gov/icr.

The ICR in this final rule that pertains

to the requirements for the control of

gasoline sulfur will be submitted for

approval to the Office of Management

and Budget (OMB) under the Paperwork

Reduction Act, 44 U.S.C. 3501 et seq.

The submission to OMB of the ICR

document that contains this ICR and its

availability to the public will be

announced in a subsequent Federal

Register notice.

Federal Register / Vol. 65, No. 28 / Thursday, February 10, 2000 / Rules and Regulations 6819

158These ICRs will become effective on the date

that model year 2001 vehicles are introduced into

commerce. EPA assumes that September 1, 2000 is

the earliest date that model year 2001 vehicles will

be marketed.

159Assuming model year 2004 vehicles are

introduced into commerce on this date.

160A refiner can petition EPA for an extension of

the small refiner provisions beyond January 1, 2008,

based on hardship.

161The information collection requirements

associated with the proposed gasoline sulfur control

program are contained in the Information Collection

Request that accompanied the Tier 2 NPRM which

is entitled ‘‘Recordkeeping and Reporting

Requirements Regarding the Sulfur Content of

Motor Vehicle Gasoline Under the Tier 2 Proposed

Rule’’, ICR #1907.01. Copies of this ICR can be

obtained as discussed earlier in this section.

The Agency may not conduct or

sponsor an information collection, and

a person is not required to respond to

a request for information unless the

information collection request displays

a currently valid OMB control number.

The OMB control numbers for EPA’s

regulations are listed in 40 CFR Part 9

and 48 CFR Chapter 15. The OMB

control numbers for the information

collection requirements in this rule will

be listed in an amendment to 40 CFR

part 9 in a subsequent Federal Register

notice after OMB approves the ICRs.

The Paperwork Reduction Act

stipulates that ICR documents estimate

the burden of activities required of

regulated parties within a three year

time period. Consequently, the ICR

documents associated with today’s final

rule contain burden estimates for the

activities that will be required under the

first three years of the program.

ICRs Pertaining to the Amendments to

Vehicle Certification Requirements: The

information collection burden to vehicle

certifiers associated with the

amendments to the vehicle certification

requirements in today’s notice pertain to

the fleet-average NOX standard and

emission credits provisions. These

requirements are very similar to those

under the voluntary National Low

Emission Vehicle (NLEV) program,

which includes a fleet-average standard

for nonmethane hydrocarbon organic

gases (NMOG) and associated emission

credits provisions. The hours spent

annually by a given vehicle certifier on

the information collection activities

associated with the these recordkeeping

and reporting requirements depends

upon certifier-specific variables,

including: the scope/variety of their

product line as reflected in the number

of test groups and strategy used to

comply with the fleet-average NOX

standard, the extent they utilize

emissions credits provisions, and

whether they opted into the NLEV

program. Vehicle certifiers that use the

provisions for early banking of emission

credits will be subject to the associated

information collection requirements as

early as September 1, 2000.158 All

vehicle certifiers will be required to

comply with the information collection

requirements associated with the

amendments to the vehicle certification

program beginning September 1,

2003.159 The ICR document for the

amendments to the vehicle certification

program in this final rule provides

burden estimates for all of the

associated information collection

requirements. The total information

collection burden associated with the

amendments to the vehicle certification

requirements is estimated at 8,406 hours

and $567,217 annually for the certifiers

of light-duty vehicles, medium-duty

passenger vehicles, and light-duty

trucks.

ICRs Pertaining to the Requirements

for Gasoline Sulfur Control: The

information collection burden to

gasoline refiners, importers, marketers,

distributors, retailers and wholesale

purchaser-consumers (WPCs), and users

of research and development (R&D)

gasoline pertain to the gasoline sulfur

control program in today’s rule. The

scope of the recordkeeping and

reporting requirements for each

regulated party, and therefore the cost to

that party, reflects the party’s

opportunity to create, control, or alter

the sulfur content of gasoline. As a

result, refiners and importers have

significant requirements, which are

necessary both for their own tracking,

and that of downstream parties, and for

EPA enforcement. Parties downstream

from the gasoline production or import

point, such as retailers, have minimal

burdens that are primarily associated

with the transfer and retention of

product transfer documents. Many of

the reporting and recordkeeping

requirements for refiners and importers

regarding the sulfur content of gasoline

currently exist under EPA’s

Reformulated Gasoline (RFG) and AntiDumping programs. The ICR for the RFG

program covered start up costs

associated with reporting gasoline sulfur

content under the RFG program.

Consequently, much of the cost of the

information collection requirements

under the gasoline sulfur control

program has already been accounted for

under the RFG program ICR. In

addition, many of the information

collection burdens associated with the

sulfur program are the result of

provisions designed to provide refiners

with flexibility in demonstrating

compliance with the sulfur standards in

the early years of the program, such as

the credit trading and small refiner

programs.

The information collection

requirements under the sulfur control

program evolve over time as the

program is phased-in. Beginning July 1,

2000, certain requirements apply to

parties that voluntarily opt to generate

credits for early sulfur reduction under

the average banking and trading (ABT)

provisions. Many of the requirements do

not become applicable until the

beginning of the sulfur control program

on October 1, 2003, when all refiners are

required to meet the sulfur standards.

The information collection requirements

under the sulfur control program

become stable after January 1, 2008,

when the optional small refiner

provisions expire.160

The ICR document for the sulfur

control program in this final rule will

provide burden estimates for the

activities required under the first three

years of the program, from July 1, 2000,

through June 30, 2003. The burden

associated with activities required after

June 30, 2003, will be estimated in later

ICRs. The initial ICR for the gasoline

sulfur control program, however, will

provide a qualitative characterization of

all of the required activities and

associated burdens for the various

regulated parties as they develop, and

until they become stable after January 1,

2008.

In the ICR associated with the NPRM

for this final rule, we estimated that the

total burden of the information

collection requirements that would be

applicable during the first three years of

the proposed gasoline sulfur control

program would be 42,479 hours and

$2,149,865 annually.161 Annual burden

estimates for the various regulated

entities under the initial three year

period of the gasoline sulfur control

program were also provided in the

NPRM ICR as follows:

• Refiners: 31,231 hours; $1,879,822.

• Importers: 40 hours; $2,067.

• Pipelines: 85 hours; $2,785.

• Terminals: 1,700 hours; $55,700.

• Truckers: 3,333 hours; $118,000.

• Retailers/WPCs: 6,087 hours;

$91,298.

• R&D Gasoline Users: 3 hours; $193.

We received few comments on the

ICR burden estimates in the proposed

sulfur rule. Most regulated parties have

been fulfilling reporting, recordkeeping

and testing requirements under the

reformulated and conventional gasoline

regulations. The only negative

comments we received related to the

batch testing for sulfur content and

sample retention for conventional

gasoline. We believe the estimated cost

of complying with these requirements is

somewhat higher than the actual

6820 Federal Register / Vol. 65, No. 28 / Thursday, February 10, 2000 / Rules and Regulations

burdens industry will realize. The ICR

for this final rule will be adjusted

accordingly.

We estimate that there will be some

additional costs and hourly burdens

over those estimated in the NPRM

associated with certain changes made to

the sulfur program from the NPRM to

this final rule. In particular, this final

rule includes a program which provides

for relaxed standards in the early years

of the program for refiners and

importers who produce or import

gasoline for use in certain states in the

western U.S. This program requires

some additional reporting and

recordkeeping burdens for those refiners

and importers who participate in the

program, since they will be required to

submit an application for the program,

including a baseline for purposes of

establishing their sulfur standard. This

program requires gasoline intended for

use in the geographic area to be

identified on product transfer

documents and segregated from other

gasoline in the distribution system. This

final rule also includes provisions for

trading sulfur allotments to provide

refiners and importers additional

flexibility in meeting the corporate pool

average standards. This program

requires additional reporting and

recordkeeping to track allotment trading

activity. In addition, the final rule

requires small refiners to submit

information regarding their crude oil

capacity in order to qualify for the small

refiner standards under the rule. Small

refiners are also required to submit

reports of their progress toward

compliance with the sulfur standards.

The additional total annual cost and

hourly burden over the first three years

of the program, as a result of changes

made to the program in the final rule,

are estimated to add less than one

percent to the overall burden estimates

contained in the NPRM ICR for the

sulfur control program.

Total Burden of the ICRs: In the

NPRM, we estimated that the total

burden of the recordkeeping and

reporting requirements associated with

the proposed vehicle certification and

gasoline sulfur control requirements

would be 50,840 hours and $2,714,037

annually over the first three years that

these requirements would be in effect.

In the ICR document for this final rule

which covers the ICRs for the vehicle

certification program, the burden

estimates were increased by 45 hours

and $3,045 over the burden estimates in

the NPRM ICR. This increase reflects

changes from the NPRM in the final rule

associated the inclusion of the mediumduty passenger vehicles (MDPVs) under

the program. As discussed above, we

anticipate that changes to the ICR

document for this final rule which

covers the ICRs for the sulfur control

program will have burden estimates less

than one percent higher than the

estimates contained in the NPRM.

Adding these increased costs to the

burden estimates presented in the

NPRM, we arrive at an estimate of the

total burden of the recordkeeping and

reporting requirements associated with

the vehicle certification and gasoline

sulfur control requirements in this final

rule of less than 51,350 hours and

$2,742,000 annually over the first three

years that these requirements will be in

effect. These burden estimates will be

more precisely stated in the forthcoming

Federal Register notice which

announces the submission to OMB of

the ICR document for this final rule that

covers the ICRs for the sulfur control

program and the availability of this ICR

document to the public.

D. Intergovernmental Relations

1. Unfunded Mandates Reform Act

Title II of the Unfunded Mandates

Reform Act of 1995 (UMRA), P.L. 104–

4, establishes requirements for federal

agencies to assess the effects of their

regulatory actions on state, local, and

tribal governments, and the private

sector. Under section 202 of the UMRA,

EPA generally must prepare a written

statement, including a cost-benefit

analysis, for proposed and final rules

with ‘‘federal mandates’’ that may result

in expenditures to state, local, and tribal

governments, in the aggregate, or to the

private sector, of $100 million or more

for any single year. Before promulgating

a rule for which a written statement is

needed, section 205 of the UMRA

generally requires EPA to identify and

consider a reasonable number of

regulatory alternatives and adopt the

least costly, most cost-effective, or least

burdensome alternative that achieves

the objectives of the rule. The

provisions of section 205 do not apply

when they are inconsistent with

applicable law. Moreover, section 205

allows EPA to adopt an alternative that

is not the least costly, most costeffective, or least burdensome

alternative if EPA provides an

explanation in the final rule of why

such an alternative was adopted.

Before we establish any regulatory

requirement that may significantly or

uniquely affect small governments,

including tribal governments, we must

develop a small government plan

pursuant to section 203 of the UMRA.

Such a plan must provide for notifying

potentially affected small governments,

and enabling officials of affected small

governments to have meaningful and

timely input in the development of our

regulatory proposals with significant

federal intergovernmental mandates.

The plan must also provide for

informing, educating, and advising

small governments on compliance with

the regulatory requirements.

This rule contains no federal

mandates for state, local, or tribal

governments as defined by the

provisions of Title II of the UMRA. The

rule imposes no enforceable duties on

any of these governmental entities.

Nothing in the rule would significantly

or uniquely affect small governments.

EPA has determined that this rule

contains federal mandates that may

result in expenditures of more than

$100 million to the private sector in any

single year. EPA believes that today’s

final rule represents the least costly,

most cost-effective approach to achieve

the air quality goals of the rule. The

cost-benefit analysis required by the

UMRA is discussed in Section IV.D.

above and in the Draft RIA. See the

‘‘Administrative Designation’’ and

Regulatory Analysis’ section in today’s

preamble (VIII.A.) for further

information regarding these analyses.

2. Executive Order 13084: Consultation

and Coordination With Indian Tribal

Governments

Under Executive Order 13084, EPA

may not issue a regulation that is not

required by statute, that significantly or

uniquely affects the communities of

Indian Tribal governments, and that

imposes substantial direct compliance

costs on those communities, unless the

federal government provides the funds

necessary to pay the direct compliance

costs incurred by the tribal

governments, or EPA consults with

those governments. If EPA complies by

consulting, Executive Order 13084

requires EPA to provide to the Office of

Management and Budget, in a separately

identified section of the preamble to the

rule, a description of the extent of EPA’s

prior consultation with representatives

of affected tribal governments, a

summary of the nature of their concerns,

and a statement supporting the need to

issue the regulation. In addition,

Executive Order 13084 requires EPA to

develop an effective process permitting

elected officials and other

representatives of Indian tribal

governments ‘‘to provide meaningful

and timely input in the development of

regulatory policies on matters that

significantly or uniquely affect their

communities.’’

Today’s rule does not significantly or

uniquely affect the communities of

Indian Tribal governments. The motor

Federal Register / Vol. 65, No. 28 / Thursday, February 10, 2000 / Rules and Regulations 6821

vehicle emissions, motor vehicle fuel,

and other related requirements for

private businesses in today’s rule would

have national applicability, and thus

would not uniquely affect the

communities of Indian Tribal

Governments. Further, no circumstances

specific to such communities exist that

would cause an impact on these

communities beyond those discussed in

the other sections of today’s document.

Thus, EPA’s conclusions regarding the

impacts from the implementation of

today’s rule discussed in the other

sections of this preamble are equally

applicable to the communities of Indian

Tribal governments. Accordingly, the

requirements of section 3(b) of

Executive Order 13084 do not apply to

this rule.

3. Executive Order 13132 (Federalism)

Executive Order 13132, entitled

‘‘Federalism’’ (64 FR 43255, August 10,

1999), requires EPA to develop an

accountable process to ensure

‘‘meaningful and timely input by State

and local officials in the development of

regulatory policies that have federalism

implications.’’ ‘‘Policies that have

federalism implications’’ is defined in

the Executive Order to include

regulations that have ‘‘substantial direct

effects on the States, on the relationship

between the national government and

the States, or on the distribution of

power and responsibilities among the

various levels of government.

Under Section 6 of Executive Order

13132, EPA may not issue a regulation

that has federalism implications, that

imposes substantial direct compliance

costs, and that is not required by statute,

unless the Federal government provides

the funds necessary to pay the direct

compliance costs incurred by State and

local governments, or EPA consults with

State and local officials early in the

process of developing the proposed

regulation. EPA also may not issue a

regulation that has federalism

implications and that preempts State

law, unless the Agency consults with

State and local officials early in the

process of developing the proposed

regulation.

Section 4 of the Executive Order

contains additional requirements for

rules that preempt State or local law,

even if those rules do not have

federalism implications (i.e., the rules

will not have substantial direct effects

on the States, on the relationship

between the national government and

the states, or on the distribution of

power and responsibilities among the

various levels of government). Those

requirements include providing all

affected State and local officials notice

and an opportunity for appropriate

participation in the development of the

regulation. If the preemption is not

based on express or implied statutory

authority, EPA also must consult, to the

extent practicable, with appropriate

State and local officials regarding the

conflict between State law and

Federally protected interests within the

agency’s area of regulatory

responsibility.

This final rule does not have

federalism implications. It will not have

substantial direct effects on the States,

on the relationship between the national

government and the States, or on the

distribution of power and

responsibilities among the various

levels of government, as specified in

Executive Order 13132. This rule adopts

national emissions standards for certain

categories of motor vehicles and

national standards to control gasoline

sulfur. The requirements of the rule will

be enforced by the federal government

at the national level. Thus, the

requirements of section 6 of the

Executive Order do not apply to this

rule. Although section 6 of Executive

Order 13132 does not apply to this rule,

EPA did consult with State and local

officials in developing this rule. In

addition, EPA provided state and local

officials an opportunity to comment on

the proposed regulations. A summary of

concerns raised by commenters,

including state and local commenters,

and EPA’s response to those concerns,

is found in the Response to Comments

document for this rulemaking.

This final rule preempts State and

local controls or prohibitions respecting

gasoline sulfur content, pursuant to

Section 211(c)(4) of the Clean Air Act.

The basis and scope of preemption is

described in Section IV.C.1.d of this

notice. Although this rule was proposed

before the November 2, 1999 effective

date of Executive Order 13132, EPA

provided State and local officials notice

and an opportunity for appropriate

participation when it published the

proposed rule, as described above.

Thus, EPA has complied with the

requirements of section 4 of the

Executive Order.

E. National Technology Transfer and

Advancement Act

Section 12(d) of the National

Technology Transfer and Advancement

Act of 1995 (NTTAA), Section 12(d) of

Public Law 104–113, directs EPA to use

voluntary consensus standards in its

regulatory activities unless it would be

inconsistent with applicable law or

otherwise impractical. Voluntary

consensus standards are technical

standards (e.g., materials specifications,

test methods, sampling procedures, and

business practices) developed or

adopted by voluntary consensus

standards bodies. The NTTAA directs

EPA to provide Congress, through OMB,

explanations when the Agency decides

not to use available and applicable

voluntary consensus standards.

This rule references technical

standards adopted by the Agency

through previous rulemakings. No new

technical standards are established in

today’s rule. The standards referenced

in today’s rule involve the measurement

of gasoline fuel parameters and motor

vehicle emissions. The measurement

standards for gasoline fuel parameters

referenced in today’s proposal are all

voluntary consensus standards. The

motor vehicle emissions measurement

standards referenced in today’s rule are

government-unique standards that were

developed by the Agency through

previous rulemakings. These standards

have served the Agency’s emissions

control goals well since their

implementation and have been well

accepted by industry. EPA is not aware

of any voluntary consensus standards

for the measurement of motor vehicle

emissions. Therefore, the Agency is

using the existing EPA-developed

standards found in 40 CFR Part 86 for

the measurement of motor vehicle

emissions

F. Executive Order 13045: Children’s

Health Protection

Executive Order 13045, ‘‘Protection of

Children from Environmental Health

Risks and Safety Risks’’ (62 FR 19885,

April 23, 1997) applies to any rule that

(1) is determined to be ‘‘economically

significant’’ as defined under Executive

Order 12866, and (2) concerns an

environmental health or safety risk that

EPA has reason to believe may have a

disproportionate effect on children. If

the regulatory action meets both criteria,

section 5–501 of the Order directs the

Agency to evaluate the environmental

health or safety effects of the planned

rule on children, and explain why the

planned regulation is preferable to other

potentially effective and reasonably

feasible alternatives considered by the

Agency.

This rule is subject to the Executive

Order because it is an economically

significant regulatory action as defined

by Executive Order 12866 and it

concerns in part an environmental

health or safety risk that we have reason

to believe may have a disproportionate

effect on children.

This rulemaking will achieve

significant reductions of various

emissions from passenger cars and light

trucks, primarily NOX, but also NMOG

6822 Federal Register / Vol. 65, No. 28 / Thursday, February 10, 2000 / Rules and Regulations

and PM. These pollutants raise concerns

regarding environmental health or safety

risks that EPA has reason to believe may

have a disproportionate effect on

children, such as impacts from ozone,

PM and certain toxic air pollutants. See

Section III of this preamble and the RIA

for a further discussion of these issues.

The effects of ozone and PM on

children’s health were addressed in

detail in EPA’s rulemaking to establish

the NAAQS for these pollutants, and we

are not revisiting those issues here. We

believe, however, that the emission

reductions from the strategies

established in this rulemaking will

further reduce air toxics and the related

adverse impacts on children’s health.

We will be addressing the issues raised

by air toxics from motor vehicles and

their fuels in a separate rulemaking that

we will initiate in the near future under

section 202(l) of the Act. That

rulemaking will address the emissions

of hazardous air pollutants from

vehicles and fuels, and the appropriate

level of control of HAPs from these

sources.

In this final rule, we have evaluated

several regulatory strategies for

reductions in emissions from passenger

cars and light trucks. (See sections IV,

V, and VI of this preamble as well as the

RIA.) For the reasons described there,

we believe that these strategies are

preferable under the Clean Air Act to

other potentially effective and

reasonably feasible alternatives that we

considered for purposes of reducing

emissions from these sources (as a way

of helping areas achieve and maintain

the NAAQS for ozone and PM).

Moreover, we believe that we have

selected for proposal the most stringent

and effective control reasonably feasible

at this time, in light of the technology

and cost requirements of the Act.

G. Congressional Review Act

The congressional review Act, 5

U.S.C. 801 et seq., as added by the Small

Business Regulatory Enforcement

Fairness Act of 1996, generally provides

that before a rule may take effect, the

agency promulgating the rule must

submit a rule report, which includes a

copy of the rule, to each House of the

Congress and to the comptroller General

of the United States. EPA will submit a

report containing this rule and other

required information to the U.S. Senate,

the U.S. House of representatives, and

the Comptroller General of the United

States prior to publication of the rule in

the Federal Register. This rule is a

‘‘major rule’’ as defined by 5 U.S.C.

804(2).

IX. Statutory Provisions and Legal

Authority

Statutory authority for the vehicle

controls set in today’s final rule can be

found in sections 202, 206, 207, 208,

and 301 of the Clean Air Act (CAA), as

amended, 42 U.S.C. sections 7521, 7525,

7541, 7542 and 7601.

Statutory authority for the fuel

controls set in today’s final rule comes

from section 211(c) of the CAA (42

U.S.C., section 7545(c)), which allows

EPA to regulate fuels that either

contribute to air pollution which

endangers public health or welfare or

which impair emission control

equipment. Both criteria are satisfied for

the gasoline sulfur controls we are

establishing today. Additional support

for the procedural and enforcementrelated aspects of the fuel’s controls in

today’s final rule, including the record

keeping requirements, comes from

sections 114(a) and 301(a) of the CAA.

List of Subjects

40 CFR Part 80

Environmental protection, Air

pollution control, Fuel additives,

Gasoline, Imports, Incorporation by

reference, Labeling, Motor vehicle

pollution, Penalties, Reporting and

recordkeeping requirements.

40 CFR Part 85

Environmental protection,

Administrative practice and procedure,

Confidential business information,

Imports, Labeling, Motor vehicle

pollution, Penalties, Reporting and

recordkeeping requirements, Research,

Warranties.

40 CFR Part 86

Environmental protection,

Administrative practice and procedure,

Confidential business information,

Incorporation by reference, Labeling,

Motor vehicle pollution, Penalties,

Reporting and recordkeeping

requirements.

Dated: December 21, 1999.

Carol M. Browner,

Administrator.

For the reasons set forth in the

preamble, parts 80, 85 and 86 of title 40,

of the Code of Federal Regulations are

amended as follows:

PART 80—REGULATION OF FUELS

AND FUEL ADDITIVES

1. The authority citation for part 80

continues to read as follows:

Authority: Secs. 114, 211, and 301(a) of the

Clean Air Act, as amended (42 U.S.C. 7414,

7545 and 7601(a)).

2. Section 80.2 is amended by

removing and reserving paragraph (aa),

adding paragraph (d), and revising

paragraphs (h), (s) and (gg) to read as

follows:

§ 80.2 Definitions.

* * * * *

(d) Previously certified gasoline

means gasoline or RBOB that previously

has been included in a batch for

purposes of complying with the

standards for reformulated gasoline,

conventional gasoline or gasoline sulfur,

as appropriate.

* * * * *

(h) Refinery means any facility,

including but not limited to, a plant,

tanker truck, or vessel where gasoline or

diesel fuel is produced, including any

facility at which blendstocks are

combined to produce gasoline or diesel

fuel, or at which blendstock is added to

gasoline or diesel fuel.

* * * * *

(s) Gasoline blending stock,

blendstock, or component means any

liquid compound which is blended with

other liquid compounds to produce

gasoline.

* * * * *

(gg) Batch of gasoline means a

quantity of gasoline that is

homogeneous with regard to those

properties that are specified for

conventional or reformulated gasoline.

* * * * *

3. Section 80.46 is amended by

revising paragraphs (a) and (h) to read

as follows:

§ 80.46 Measurement of reformulated

gasoline fuel parameters.

(a) Sulfur. Sulfur content of gasoline

and butane must be determined by use

of the following methods:

(1) The sulfur content of gasoline

must be determined by use of American

Society for Testing and Materials

(ASTM) standard method D 2622–98,

entitled ‘‘Standard Test Method for

Sulfur in Petroleum Products by

Wavelength Dispersive X-ray

Fluorescence Spectrometry.’’

(2) The sulfur content of butane must

be determined by the use of ASTM

standard method D 3246–96, entitled

‘‘Standard Test Method for Sulfur in

Petroleum Gas by Oxidative

Microcoulometry.’’

* * * * *

(h) Incorporations by reference.

ASTM standard methods D 2622–98, D

3246–96, D 3606–92, D 1319–93, D

4815–93, and D 86–90 with the

exception of the degrees Fahrenheit

figures in Table 9 of D 86–90, are

incorporated by reference. These

Federal Register / Vol. 65, No. 28 / Thursday, February 10, 2000 / Rules and Regulations 6823

incorporations by reference were

approved by the Director of the Federal

Register in accordance with 5 U.S.C.

552(a) and 1 CFR part 51. Copies may

be obtained from the American Society

for Testing and Materials, 100 Barr

Harbor Dr., West Conshohocken, PA

19428. Copies may be inspected at the

Air Docket Section (LE–131), room M–

1500, U.S. Environmental Protection

Agency, Docket No. A–97–03, 401 M

Street, SW., Washington, DC 20460, or

at the Office of the Federal Register, 800

North Capitol Street, NW., Suite 700,

Washington, DC.

4. Subpart H is added to part 80 to

read as follows:

Subpart H—Gasoline Sulfur

General Information

Sec.

80.180 [Reserved]

80.185 [Reserved]

80.190 Who must register with EPA under

the sulfur program?

Gasoline Sulfur Standards

80.195 What are the gasoline sulfur

standards for refiners and importers?

80.200 What gasoline is subject to the sulfur

standards and requirements?

80.205 How is the annual refinery or

importer average and corporate pool

average sulfur level determined?

80.210 What sulfur standards apply to

gasoline downstream from refineries and

importers?

80.211 [Reserved]

80.212 What requirements apply to

oxygenate blenders?

80.213–80.214 [Reserved]

Geographic Phase-In Program

80.215 What is the scope of the geographic

phase-in program?

80.216 What standards apply to gasoline

produced or imported for use in the

GPA?

80.217 How does a refiner or importer

apply for the GPA standards?

80.218 [Reserved]

80.219 Designation and downstream

requirements for GPA gasoline.

80.220 What are the downstream standards

for GPA gasoline?

Hardship Provisions

80.225 What is the definition of a small

refiner?

80.230 Who is not eligible for the hardship

provisions for small refiners?

80.235 How does a refiner obtain approval

as a small refiner?

80.240 What are the small refiner gasoline

sulfur standards?

80.245 How does a small refiner apply for

a sulfur baseline?

80.250 How is the small refiner sulfur

baseline and volume determined?

80.255 Compliance plans and

demonstration of commitment to

produce low sulfur gasoline.

80.260 What are the procedures and

requirements for obtaining a hardship

extension?

80.265 How will the EPA approve or

disapprove a hardship extension

application?

80.270 Can a refiner seek temporary relief

from the requirements of this subpart?

Allotment Trading Program

80.275 How are allotments generated and

used?

Averaging, Banking and Trading (ABT)

Program—General Information

80.280 [Reserved]

80.285 Who may generate credits under the

ABT program?

80.290 How does a refiner apply for a sulfur

baseline?

ABT Program—Baseline Determination

80.295 How is a refinery sulfur baseline

determined?

80.300 [Reserved]

ABT Program—Credit Generation

80.305 How are credits generated during

the time period 2000 through 2003?

80.310 How are credits generated beginning

in 2004?

ABT Program—Credit Use

80.315 How are credits used and what are

the limitations on credit use?

80.320 [Reserved]

80.325 [Reserved]

Sampling, Testing and Retention

Requirements for Refiners and Importers

80.330 What are the sampling and testing

requirements for refiners and importers?

80.335 What gasoline sample retention

requirements apply to refiners and

importers?

80.340 What standards and requirements

apply to refiners producing gasoline by

blending blendstocks into previously

certified gasoline (PCG)?

80.345 [Reserved]

80.350 What alternative sulfur standards

and requirements apply to importers

who transport gasoline by truck?

80.355 [Reserved]

Recordkeeping and Reporting

Requirements

80.360 [Reserved]

80.365 What records must be kept?

80.370 What are the sulfur reporting

requirements?

80.371–80.373 [Reserved]

Exemptions

80.374 What if a refiner or importer is

unable to produce gasoline conforming

to the requirements of this subpart?

80.375 What requirements apply to

California gasoline?

80.380 What are the requirements for

obtaining an exemption for gasoline used

for research, development or testing

purposes?

Violation Provisions

80.385 What acts are prohibited under the

gasoline sulfur program?

80.390 What evidence may be used to

determine compliance with the

prohibitions and requirements of this

subpart and liability for violations of this

subpart?

80.395 Who is liable for violations under

the gasoline sulfur program?

80.400 What defenses apply to persons

deemed liable for a violation of a

prohibited act?

80.405 What penalties apply under this

subpart?

Provisions for Foreign Refiners With

Individual Sulfur Baselines

80.410 What are the additional

requirements for gasoline produced at

foreign refineries having individual

small refiner sulfur baselines, foreign

refineries granted temporary relief under

§ 80.270, or baselines for generating

credits during 2000 through 2003?

Attest Engagements

80.415 What are the attest engagement

requirements for gasoline sulfur

compliance applicable to refiners and

importers?

Subpart H—Gasoline Sulfur

General Information

§ 80.180 [Reserved]

§ 80.185 [Reserved]

§ 80.190 Who must register with EPA

under the sulfur program?

(a) Refiners and importers who are

registered by EPA under § 80.76 are

deemed to be registered for purposes of

this subpart.

(b) Refiners and importers subject to

the standards in § 80.195 who are not

registered by EPA under § 80.76 must

provide to EPA the information required

by § 80.76 by November 1, 2003, or not

later than three months in advance of

the first date that such person produces

or imports gasoline, whichever is later.

(c) Refiners with any refinery subject

to the small refiner standards under

§ 80.240, or refiners subject to the

geographic phase-in area (GPA)

standards under § 80.216, who are not

registered by EPA under § 80.76 must

provide to EPA the information required

under § 80.76 by December 31, 2000.

(d) Any refiner who plans to generate

credits or allotments under § 80.305 or

§ 80.275 in any year prior to 2004 who

is not registered by EPA under § 80.76

must register under § 80.76 no later than

September 30 of the year prior to the

first year of credit generation. Any

refiner who plans to generate credits in

2000 who is not registered by EPA

under § 80.76 must register under

§ 80.76 no later than May 10, 2000.

6824 Federal Register / Vol. 65, No. 28 / Thursday, February 10, 2000 / Rules and Regulations

Gasoline Sulfur Standards

§ 80.195 What are the gasoline sulfur

standards for refiners and importers?

(a)(1) The gasoline produced by small

refiners subject to the standards at

§ 80.240, and gasoline designated as

GPA gasoline under § 80.219(a), are as

follows:

Gasoline sulfur standards for the

averaging period

beginning:

January 1,

2004

January 1,

2005

January 1,

2006 and

subsequent

Refinery or Importer Average ...................................................................................................... (1) 30.00 30.00

Corporate Pool Average .............................................................................................................. 120.00 90.00 (1)

Per-Gallon Cap ............................................................................................................................ 300 300 80

1 Not applicable.

(2) The sulfur standards and all

compliance calculations for sulfur

under this subpart are in parts per

million (ppm) and volumes are in

gallons.

(3) The averaging period is January 1

through December 31 of each year.

(4) The standards under this

paragraph (a) for all imported gasoline

shall be met by the importer.

(b)(1) The refinery or importer annual

average gasoline sulfur standard is the

maximum average sulfur level allowed

for gasoline produced at a refinery or

imported by an importer during each

calendar year starting January 1, 2005.

(2) The annual average sulfur level is

calculated in accordance with § 80.205.

(3) The refinery or importer annual

average gasoline sulfur standard may be

met using credits as provided under

§ 80.275 or § 80.315.

(4) In 2005 only, the refinery or

importer annual average sulfur standard

may be met using credits or allotments

as provided under § 80.275 or credits as

provided under § 80.315.

(c)(1) The corporate pool average

gasoline sulfur standards applicable in

2004 and 2005 are the maximum

average sulfur levels allowed for a

refiner’s or importer’s gasoline

production from all of the refiner’s

refineries or all gasoline imported by an

importer in a calendar year. The

corporate pool average standards for a

party that is both a refiner and an

importer are the maximum average

sulfur levels allowed for all the party’s

combined gasoline production from all

refineries and imported gasoline in a

calendar year.

(2) The corporate pool average is

calculated in accordance with the

provisions of § 80.205.

(3) The corporate pool average

standard may be met using sulfur

allotments under § 80.275.

(4) The corporate pool average

standards do not apply to approved

small refiners subject to the small

refiner gasoline sulfur standards under

§ 80.240.

(5)(i) Joint ventures, in which two or

more parties collectively own and

operate one or more refineries, will be

treated as a separate refiner under this

section.

(ii) One partner to a joint venture may

include one or more joint venture

refineries in its corporate pool for

purposes of complying with the

corporate pool average standards. The

joint venture will be in compliance for

such joint venture refinery(ies) if the

partner’s corporate pool average meets

the corporate pool average standards.

The joint venture entity must

demonstrate compliance with the

corporate pool average standards for any

refinery(ies) owned by the joint venture

that are not included in one partner’s

corporate pool.

(d)(1) The per-gallon cap standard is

the maximum sulfur level allowed for

each batch of gasoline produced or

imported starting January 1, 2004.

(2) In 2004 only, a refiner or importer

may produce or import gasoline with a

per-gallon sulfur content greater than

300 ppm, to a maximum of 350 ppm,

provided the following conditions are

met:

(i) The refinery or importer becomes

subject to an adjusted per-gallon cap

standard in 2005, calculated using the

following formula:

ACS=300¥(Smax¥300)

Where:

ACS=Adjusted cap standard.

Smax=Maximum sulfur content of any

gasoline produced at a refinery or

imported by an importer during

2004.

(ii) The adjusted cap standard

calculated under paragraph (d)(2)(i) of

this section applies to all gasoline

produced at a refinery or imported by an

importer during 2005.

(iii) The refinery or importer remains

subject to the 30.00 average standard

under paragraph (a) of this section for

2005.

(iv) The provisions of this paragraph

(d)(2) apply to gasoline designated as

GPA gasoline under § 80.219(a).

(v) The provisions of this paragraph

(d)(2) do not apply to small refiners as

defined in § 80.225.

§ 80.200 What gasoline is subject to the

sulfur standards and requirements?

For the purpose of this subpart, all

reformulated and conventional gasoline

and RBOB, collectively called

‘‘gasoline’’ unless otherwise specified, is

subject to the standards and

requirements under this subpart, with

the following exceptions:

(a) Gasoline that is used to fuel

aircraft, racing vehicles or racing boats

that are used only in sanctioned racing

events, provided that:

(1) Product transfer documents

associated with such gasoline, and any

pump stand from which such gasoline

is dispensed, identify the gasoline either

as gasoline that is restricted for use in

aircraft, or as gasoline that is restricted

for use in racing motor vehicles or

racing boats that are used only in

sanctioned racing events;

(2) The gasoline is completely

segregated from all other gasoline

throughout production, distribution and

sale to the ultimate consumer; and

(3) The gasoline is not made available

for use as motor vehicle gasoline, or

dispensed for use in motor vehicles,

except for motor vehicles used only in

sanctioned racing events.

(b) California gasoline as defined in

§ 80.375.

(c) Gasoline that is exported for sale

outside the U.S.

Federal Register / Vol. 65, No. 28 / Thursday, February 10, 2000 / Rules and Regulations 6825

§ 80.205 How is the annual refinery or

importer average and corporate pool

average sulfur level determined?

(a) The annual refinery or importer

average and corporate pool average

gasoline sulfur level is calculated as

follows:

S

V S

V

a

i i

i

n

i

i

n =

×

=

=

∑

∑

( )

1

1

Where:

Sa=The refinery or importer annual

average sulfur value, or corporate

pool average sulfur value, as

applicable.

Vi=The volume of gasoline produced or

imported in batch i.

Si=The sulfur content of batch i

determined under § 80.330.

n=The number of batches of gasoline

produced or imported during the

averaging period.

i=Individual batch of gasoline produced

or imported during the averaging

period.

(b) All annual refinery or importer

average or corporate pool average

calculations shall be conducted to two

decimal places.

(c) A refiner or importer may include

oxygenate added downstream from the

refinery or import facility when

calculating the sulfur content, provided

the following requirements are met:

(1) For oxygenate added to

conventional gasoline, the refiner or

importer must comply with the

requirements of § 80.101(d)(4)(ii).

(2) For oxygenate added to RBOB, the

refiner or importer must comply with

the requirements of § 80.69(a).

(d) Refiners and importers must

exclude from compliance calculations

all of the following:

(1) Gasoline that was not produced at

the refinery;

(2) In the case of an importer, gasoline

that was imported as Certified SulfurFRGAS;

(3) Blending stocks transferred to

others;

(4) Gasoline that has been included in

the compliance calculations for another

refinery or importer; and

(5) Gasoline exempted from standards

under § 80.200.

(e)(1) A refiner or importer may

exceed the refinery or importer annual

average sulfur standard specified in

§ 80.195 for a given averaging period for

any calendar year through 2010,

creating a compliance deficit, provided

that in the calendar year following the

year the standard is not met, the refinery

or importer shall:

(i) Achieve compliance with the

refinery or importer annual average

sulfur standard specified in § 80.195;

and

(ii) Use additional sulfur credits

sufficient to offset the compliance

deficit of the previous year.

(2) No refiner or importer may have a

compliance deficit in any year after

2010. Any deficit that exists in 2010

must be made up in 2011.

(f) For refiners subject to the corporate

pool average who produce some GPA

gasoline, the refinery average sulfur

value for its GPA gasoline shall be the

average sulfur value after applying

credits.

§ 80.210 What sulfur standards apply to

gasoline downstream from refineries and

importers?

The sulfur standard for gasoline at

any point in the gasoline distribution

system downstream from refineries and

import facilities, including gasoline at

facilities of distributors, carriers,

oxygenate blenders, retailers and

wholesale purchaser-consumers

(‘‘downstream location’’), shall be

determined in accordance with the

provisions of this section.

(a) Definition. S–RGAS means

gasoline that is subject to the standards

under § 80.240 or § 80.270, including

Certified Sulfur-FRGAS as defined in

§ 80.410, except that no batch of

gasoline may be classified as S–RGAS if

the actual sulfur content is less than the

applicable per-gallon refinery cap

standard specified in § 80.195.

(b) Standards for gasoline that does

not qualify for S–RGAS downstream

standards. The following standards

apply to any gasoline that does not

qualify for S–RGAS downstream

standards under in paragraph (d) of this

section:

(1) Starting February 1, 2004 the

sulfur content of gasoline at any

downstream location other than at a

retail outlet or wholesale purchaserconsumer facility, and starting March 1,

2004 the sulfur content of gasoline at

any downstream location, shall not

exceed 378 ppm.

(2) Except as provided in § 80.220(a),

starting February 1, 2005 the sulfur

content of gasoline at any downstream

location other than at a retail outlet or

wholesale purchaser-consumer facility,

and starting March 1, 2005 the sulfur

content of gasoline at any downstream

location, shall not exceed 326 ppm.

(3) Except as provided in § 80.220(a),

starting February 1, 2006 the sulfur

content of gasoline at any downstream

location other than at a retail outlet or

wholesale purchaser-consumer facility,

and starting March 1, 2006 the sulfur

content of gasoline at any downstream

location, shall not exceed 95 ppm.

(c) Standards for gasoline that

qualifies for S–RGAS downstream

standards. In the case of any gasoline

that qualifies for S–RGAS downstream

standards under paragraph (d) of this

section, the sulfur standard shall be the

downstream standard for the gasoline

calculated under paragraph (f) of this

section. In the case of mixtures of

gasoline that qualify for different S–

RGAS downstream standards, the sulfur

standard shall be the highest

downstream standard applicable to any

of the S–RGAS in the mixture.

(d) Gasoline that qualifies for S–RGAS

downstream standards. Gasoline

qualifies for S–RGAS downstream

standards if all of the following

conditions are met:

(1) The gasoline must be comprised in

whole or part of S–RGAS.

(2) Product transfer documents

applicable to the gasoline when

received at that location must represent

that the gasoline contains S–RGAS.

(3) Except as provided in paragraph

(d)(4) of this section, the gasoline must

have been sampled and tested at that

location subsequent to the most recent

receipt of gasoline at that location, and

the test result must show a sulfur

content greater than:

(i) 350 ppm starting February 1, 2004;

(ii) 300 ppm starting February 1, 2005;

and

(iii) 80 ppm (or in the GPA, 300 ppm)

starting February 1, 2006.

(4) This sampling and testing

condition does not apply for gasoline at

any retail outlet, wholesale purchaserconsumer facility, or contained in any

transport truck.

(e) Product transfer document

information for S–RGAS. (1) On each

occasion when any refiner or importer

of S–RGAS transfers custody or title to

such gasoline, the refiner or importer

shall provide to the transferee

documents that include the following

information:

(i) Identification of the gasoline as

being S–RGAS; and

(ii) The downstream standard

applicable to the batch of gasoline under

paragraph (f) of this section.

(2) Where gasoline in whole or part is

classified as S–RGAS when received by

the transferor, and where the gasoline

transferred meets the conditions under

paragraph (d) of this section, the

transferor shall provide to the

transferee, on each occasion when

custody or title to gasoline is

transferred, documents that include the

following information:

(i) Identification of the gasoline as S–

RGAS; and

6826 Federal Register / Vol. 65, No. 28 / Thursday, February 10, 2000 / Rules and Regulations

(ii) The applicable downstream

standard under paragraph (c) of this

section. This does not apply when

gasoline is sold or dispensed for use in

motor vehicles at a retail outlet or

wholesale purchaser-consumer facility.

(3) No person shall classify gasoline

as being S–RGAS except as provided in

paragraphs (e)(1) and (e)(2) of this

section.

(4) Product codes may be used to

convey the information required by

paragraphs (e)(1) and (e)(2) of this

section if such codes are clearly

understood by each transferee.

(f) Downstream standards applicable

to S–RGAS when produced or imported.

(1) The downstream standard applicable

to any gasoline classified as S–RGAS

when produced or imported shall be

calculated using the following equation:

D=S+105×((S+2)/104)0.4

Where:

D=Downstream sulfur standard.

S=The sulfur content of the refiner’s

batch determined under § 80.330.

(2) Where more than one S–RGAS

batch is combined, prior to shipment, at

the refinery or import facility where the

S–RGAS is produced or imported, the

downstream standard applicable to the

mixture shall be the highest

downstream standard, calculated under

paragraph (f)(1) of this section, for any

S–RGAS contained in the mixture.

§ 80.211 [Reserved]

§ 80.212 What requirements apply to

oxygenate blenders?

Effective January 1, 2004, oxygenate

blenders who blend oxygenate into

gasoline downstream of the refinery that

produced the gasoline or the import

facility where the gasoline was

imported, are not subject to the

requirements of this subpart applicable

to refiners for this gasoline, but are

subject to the requirements and

prohibitions applicable to downstream

parties and the prohibition specified in

§ 80.385(e).

§§ 80.213–80.214 [Reserved]

Geographic Phase-In Program

§ 80.215 What is the scope of the

geographic phase-in program?

(a) Geographic phase-in area. (1) The

following states comprise the

geographic phase-in area (GPA) subject

to the provisions of the geographic

phase-in program: North Dakota,

Montana, Idaho, Wyoming, Utah,

Colorado, New Mexico, and Alaska.

(2) Additional counties or tribal lands

in states adjacent to the states identified

in paragraph (a) of this section will be

included in the GPA if any of the

following criteria is met:

(i) Approximately 50% or more of the

total volume of gasoline in the county

or tribal land in 1999, as measured at

the terminal(s) and bulk station(s) in the

county or tribal land, was received from

a refinery or refineries located in the

area specified in paragraph (a)(1) of this

section; or

(ii) Approximately 50% or more of the

total volume of gasoline dispensed in

the county or tribal land in 1999 was

received from a refinery or refineries

located in the area specified in

paragraph (a)(1) of this section; or

(iii) Approximately 50% or more of

the total commercial and private

dispensing outlets in the county or

tribal land in 1999 were supplied by

gasoline produced by a refinery or

refineries located in the area specified

in paragraph (a)(1) of this section.

(3) The criteria of paragraphs (a)(2)(i),

(ii) and (iii) of this section are without

regard to the method of gasoline

delivery (e.g, pipeline, truck, rail or

barge). The criteria of paragraphs

(a)(2)(ii) and (a)(2)(iii) of this section are

without regard to whether the gasoline

was transported directly from the

refinery to the dispensing outlet or

distributed through a terminal or bulk

station.

(b) Duration of the program. The

geographic phase-in program applies to

the 2004, 2005, and 2006 annual

averaging periods.

(c) Persons eligible. Any refiner or

importer who produces or imports

gasoline for use in the geographic area

under paragraph (a) of this section is

eligible to apply for the geographic

phase-in program. The provisions of the

geographic phase-in program shall

apply to imported gasoline through the

importer.

§ 80.216 What standards apply to gasoline

produced or imported for use in the GPA?

(a)(1) The refinery or importer annual

average sulfur standard for gasoline

produced or imported for use in the

geographic area under § 80.215 shall be

the lesser of:

(i) 150 ppm; or

(ii) The refinery’s or importer’s 1997/

1998 average sulfur level, calculated in

accordance with § 80.295, plus 30 ppm.

(2) In the case of any refinery whose

actual annual sulfur average decreases

to a level lower than the refinery’s

annual average sulfur standard

established under paragraph (a)(1) of

this section during the period 2000

through 2003, the standard applicable to

that refinery from 2004 through 2006

shall be the lowest average sulfur

content for any year in which the

refinery generated allotments or credits

under § 80.275(a) or § 80.305 plus 30

ppm, not to exceed 150 ppm.

(b) The per-gallon cap standard for

gasoline produced or imported for use

in the GPA under paragraph (a) of this

section shall be 300 ppm, except as

specified in § 80.195(d).

(c) The refinery or importer annual

average sulfur level is calculated in

accordance with the provisions of

§ 80.205.

(d) The refinery or importer annual

average standard under paragraph (a) of

this section may be met using sulfur

allotments or credits as provided under

§§ 80.275 and 80.315.

(e) Gasoline produced by approved

small refiners subject to the standards

under § 80.240 is not subject to the

standards under paragraphs (a) and (b)

of this section.

(f)(1) A refiner or importer whose

gasoline production or volume of

imported gasoline in 2004 or 2005 is

comprised of ≥50% of gasoline

designated as GPA gasoline under

§ 80.219 shall not be required to meet

the corporate pool average standards

under § 80.195 for its gasoline

production or imported gasoline during

the applicable averaging period.

(2) A refiner or importer whose

gasoline production or volume of

imported gasoline in 2004 or 2005 is

comprised of less than 50% of gasoline

designated as GPA gasoline under

§ 80.219 must meet the corporate pool

average standards under § 80.195 for all

the refiner’s gasoline production or the

importer’s volume of imported gasoline

during the applicable averaging period.

(g) The provisions for compliance

deficits under § 80.205(e) do not apply

to gasoline subject to the standards

under paragraphs (a) and (b) of this

section.

§ 80.217 How does a refiner or importer

apply for the GPA standards?

(a) To apply for the GPA standards

under § 80.216, a refiner or importer

must submit an application in

accordance with the provisions of

§ 80.290.

(b) Applications under paragraph (a)

of this section must be submitted by

December 31, 2000.

(c)(1) If approved, EPA will notify the

refiner or importer of each refinery’s or

the importer’s annual average sulfur

standard for gasoline produced for use

in the GPA for the 2004 through 2006

annual averaging periods.

(2) If disapproved, the refiner or

importer must comply with the

standards in § 80.195 for gasoline

produced for use in the GPA.

(d) If EPA finds that a refiner or

importer provided false or inaccurate

Federal Register / Vol. 65, No. 28 / Thursday, February 10, 2000 / Rules and Regulations 6827

information on its application under

this section, upon notice from EPA, the

refiner’s or importer’s application will

be void ab initio.

§ 80.218 [Reserved]

§ 80.219 Designation and downstream

requirements for GPA gasoline.

The requirements and prohibitions

specified in this section apply during

the period January 1, 2004 through

December 31, 2006.

(a) Designation. Any refiner or

importer shall designate any gasoline

produced or imported that is subject to

the standards under § 80.216 as ‘‘GPA’’

gasoline.

(b) Product transfer documents. (1)

On each occasion that any person

transfers custody or title to gasoline

designated as GPA gasoline, other than

when gasoline is sold or dispensed for

use in motor vehicles at a retail outlet

or wholesale purchaser-consumer

facility, the transferor shall provide to

the transferee documents that include

the following information:

(i) Identification of the gasoline as

being GPA gasoline;

(ii) A statement that the gasoline may

not be distributed or sold for use outside

the geographic phase-in area.

(2) Except for transfers to truck

carriers, retailers and wholesale

purchaser-consumers, product codes

may be used to convey the information

required by paragraph (b)(1) of this

section if such codes are clearly

understood by each transferee.

(3) The requirements under paragraph

(b)(1) of this section are in addition to

the requirement under § 80.210(e),

where appropriate, to identify gasoline

as being S–RGAS.

(c) GPA gasoline use prohibitions. (1)

All parties in the distribution system,

including refiners, importers,

distributors, carriers, oxygenate

blenders, retailers and wholesale

purchaser-consumers, are prohibited

from:

(i) Selling, offering for sale,

dispensing, distributing, storing or

transporting GPA gasoline for use

outside the geographic phase-in area;

and

(ii) Commingling GPA gasoline with

gasoline not designated as GPA gasoline

unless the mixture is classified as GPA

gasoline.

(2) Gasoline not designated as GPA

gasoline may be distributed or sold for

use in the geographic phase-in area.

§ 80.220 What are the downstream

standards for GPA gasoline?

(a) GPA gasoline. (1) During the

period February 1, 2004 through January

31, 2005, the sulfur content of GPA

gasoline at any downstream location

other than at a retail outlet or wholesale

purchaser-consumer facility, and during

the period March 1, 2004 through

February 28, 2005, the sulfur content of

GPA gasoline at any downstream

location shall not exceed 378 ppm.

(2) During the period February 1, 2005

through January 31, 2007, the sulfur

content of GPA gasoline at any

downstream location other than at a

retail outlet or wholesale purchaserconsumer facility, and during the period

March 1, 2005 through February 28,

2007, the sulfur content of GPA gasoline

at any downstream location shall not

exceed 326 ppm.

(b) GPA gasoline mixed with S–RGAS.

Notwithstanding the requirements in

paragraph (a) of this section, the sulfur

standard applicable to a mixture of GPA

gasoline and S–RGAS gasoline at a

downstream location shall be the greater

of the standard under paragraph (a) of

this section or the standard determined

under § 80.210.

Hardship Provisions

§ 80.225 What is the definition of a small

refiner?

(a) A small refiner is defined as any

person, as defined by 42 U.S.C. 7602(e),

who: (1)(i) Produces gasoline at a

refinery by processing crude oil through

refinery processing units;

(ii) Employed an average of no more

than 1,500 people, based on the average

number of employees for all pay periods

from January 1, 1998, to January 1, 1999;

and

(iii) Had an average crude capacity

less than or equal to 155,000 barrels per

calendar day (bpcd) for 1998.

(2) For the purpose of determining the

number of employees and crude

capacity under paragraph (a)(1) of this

section, the refiner shall include the

employees and crude capacity of any

subsidiary companies, any parent

company and subsidiaries of the parent

company, and any joint venture

partners.

(b) The definition under paragraph (a)

of this section applies to domestic and

foreign refiners. For any refiner owned

by a governmental entity, the number of

employees as specified in paragraph (a)

of this section shall include all

employees of the governmental entity.

(c) If, without merger with, or

acquisition of, another business unit, a

company with approved small refiner

status under § 80.235 exceeds 1,500

employees, or a corporate crude

capacity of 155,000 bpcd after January 1,

1999, it will be considered a small

refiner for the duration of the small

refiner program.

(d) Notwithstanding the definition in

paragraph (a) of this section, refiners

who acquire a refinery after January 1,

1999, or reactivate a refinery that was

shutdown or was non-operational

between January 1, 1998, and January 1,

1999, may apply for small refiner status

in accordance with the provisions of

§ 80.235.

§ 80.230 Who is not eligible for the

hardship provisions for small refiners?

(a) The following are not eligible for

the hardship provisions for small

refiners:

(1) Refiners of refineries built after

January 1, 1999;

(2) Refiners who exceed the employee

or crude oil capacity criteria under

§ 80.225(a) on January 1, 1999, but who

meet these criteria after that date,

regardless of whether the reduction in

employees or crude capacity is due to

operational changes at the refinery or a

company sale or reorganization;

(3) Importers; and

(4) Refiners who produce gasoline

other than by processing crude oil

through refinery processing units.

(b)(1) Refiners who qualify as small

under § 80.225, and subsequently

employ more than 1,500 people as a

result of merger with or acquisition of

or by another entity, are disqualified as

small refiners. If this occurs the refiner

shall notify EPA in writing no later than

20 days following this disqualifying

event.

(2) Any refiner who qualifies as small

under § 80.225 may elect to meet the

standards under § 80.195 by notifying

EPA in writing no later than November

15 prior to the year the change will

occur.

(3) Any refiner whose status changes

under paragraph (b)(1) or (2) of this

section shall meet the standards under

§ 80.195 beginning with the first

averaging period subsequent to the

status change.

§ 80.235 How does a refiner obtain

approval as a small refiner?

(a) Applications for small refiner

status must be submitted to EPA by

December 31, 2000, except for

applications submitted pursuant to

§ 80.225(d), which must be submitted by

June 1, 2002.

(b) Applications for small refiner

status must be sent to: U.S. EPA, Attn:

Sulfur Program (6406J), 401 M Street,

SW, Washington, DC 20460. For

commercial delivery: U.S. EPA, Attn:

Sulfur Program (6406J), 501 3rd Street,

NW, Washington, DC 20001.

(c) The small refiner status

application must contain the following

information for the company seeking

6828 Federal Register / Vol. 65, No. 28 / Thursday, February 10, 2000 / Rules and Regulations

small refiner status, plus any subsidiary

companies, any parent company and

subsidiaries of the parent company, and

any joint venture partners:

(1)(i) A listing of the name and

address of each location where any

employee worked during the 12 months

preceding January 1, 1999; the average

number of employees at each location

based upon the number of employees

for each pay period for the 12 months

preceding January 1, 1999; and the type

of business activities carried out at each

location; or

(ii) In the case of a refiner who

acquires a refinery after January 1, 1999,

or reactivates a refinery that was

shutdown between January 1, 1998, and

January 1, 1999, a listing of the name

and address of each location where any

employee of the refiner worked since

the refiner acquired or reactivated the

refinery; the average number of

employees at any such acquired or

reactivated refinery during each

calendar year since the refiner acquired

or reactivated the refinery; and the type

of business activities carried out at each

location.

(2) The total corporate crude capacity

of each refinery as reported to the

Energy Information Administration

(EIA) of the U.S. Department of Energy

(DOE). The information submitted to

EIA is presumed to be correct. In cases

where a company disagrees with this

information, the company may petition

EPA with appropriate data to correct the

record within 60 days after the company

submits its application for small refiner

status.

(3) A letter signed by the president,

chief operating or chief executive officer

of the company, or his/her designee,

stating that the information contained in

the application is true to the best of his/

her knowledge.

(4) Name, address, phone number,

facsimile number and E-mail address (if

available) of a corporate contact person.

(d) For joint ventures, the total

number of employees includes the

combined employee count of all

corporate entities in the venture.

(e) For government-owned refiners,

the total employee count includes all

government employees.

(f) Approval of small refiner status for

refiners who apply under § 80.225(d)

will be based on all information

submitted under paragraph (c) of this

section. Where appropriate, the

employee and crude oil capacity criteria

for such refiners will be based on the

most recent 12 months of operation.

(g) EPA will notify a refiner of

approval or disapproval of small refiner

status by letter.

(1) If approved, EPA will notify the

refiner of each refinery’s applicable

baseline standard and volume, and pergallon cap under § 80.240.

(2) If disapproved, the refiner must

comply with the standards in § 80.195.

(h) If EPA finds that a refiner

provided false or inaccurate information

on its application for small refiner

status, upon notice from EPA the

refiner’s small refiner status will be void

ab initio.

(i) Upon notification to EPA, an

approved small refiner may withdraw

its status as a small refiner. Effective on

January 1 of the year following such

notification, the small refiner will

become subject to the standards at

§ 80.195.

§ 80.240 What are the small refiner

gasoline sulfur standards?

(a) The gasoline sulfur standards for

an approved small refiner are as follows:

Refinery baseline sulfur level

Temporary sulfur standards for small refiners applicable from January 1, 2004

through December 31, 2007

Annual average Per gallon cap

0 to 30 ..................................................................................................................................................... 30.00 300

31 to 200 ................................................................................................................................................. Baseline level 300

201 to 400 ............................................................................................................................................... 200.00 300

401 to 600 ............................................................................................................................................... 50% of baseline Factor of 1.5 times

the average

standard.

601 and above ........................................................................................................................................ 300.00 450

(b) The refinery annual average sulfur

standards must be met on an annual

calendar year basis for each refinery

owned by a small refiner. The refinery

annual average sulfur level is calculated

in accordance with the provisions of

§ 80.205.

(c)(1) The refinery annual average

standards specified in paragraph (a) of

this section apply to the volume of

gasoline produced by a small refiner’s

refinery up to the lesser of:

(i) 105% of the baseline gasoline

volume as determined under

§ 80.250(a)(1); or

(ii) The volume of gasoline produced

at that refinery during the averaging

period by processing crude oil.

(2) If a refiner exceeds the volume

limitation in paragraph (c)(1) of this

section during any averaging period, the

annual average sulfur standard

applicable to the refiner for that

averaging period is calculated as

follows:

S V S AF V V

V sr bb ab

a

= ( ) ( ( )) ×+ ×−

Where:

Ssr=Small refiner annual average sulfur

standard.

Vb=Applicable volume under paragraph

(c)(1) of this section.

Va=Averaging period gasoline volume.

Sb=Small refiner sulfur baseline as

determined under § 80.250.

AF=Adjustment factor (120 in 2004; 90

in 2005; and 30 in 2006 and

thereafter).

(3) The small refiner average

standards under paragraph (a) of this

section may be met using sulfur

allotments or credits as provided under

§ 80.275 or § 80.315.

(4) The provisions for compliance

deficits under § 80.205(e) do not apply

to small refiners subject to the standards

under this section.

(d) In the case of any refiner with

small refiner status who generates sulfur

allotments or credits pursuant to

§ 80.275(a) or § 80.305, the baseline

applicable to that refiner’s refinery for

purposes of establishing the standard for

the refinery under paragraph (a) of this

section beginning in 2004 shall be the

lowest annual average sulfur content for

any year during the period in which the

refiner generated allotments or credits.

§ 80.245 How does a small refiner apply

for a sulfur baseline?

(a) Any refiner seeking small refiner

status must apply for a refinery sulfur

baseline by the deadline under § 80.235

for each of the refiner’s refineries by

providing the following information:

Federal Register / Vol. 65, No. 28 / Thursday, February 10, 2000 / Rules and Regulations 6829

(1) A sulfur baseline and baseline

volume for every refinery calculated in

accordance with § 80.250.

(2) The following information for each

batch of gasoline produced in 1997–

1998:

(i) Batch number assigned to the batch

under § 80.65(d) or § 80.101(i);

(ii) Volume; and

(iii) Sulfur content.

(3) For any refiner who acquires a

refinery after January 1, 1999, or

reactivates a refinery that was shut

down or non-operational between

January 1, 1998, and January 1, 1999,

the average sulfur level and average

volume of gasoline produced during

each year the refinery was in operation

after the refinery was acquired or

reactivated. Where appropriate, the

baseline sulfur level and volume for

such refineries will be determined based

on the annual average for the most

recent year of operation.

(b) The sulfur baseline application

must be submitted to the address

specified in § 80.235(b).

§ 80.250 How is the small refiner sulfur

baseline and volume determined?

(a)(1) The small refiner baseline

volume is determined for each refinery

as follows:

V

V

b

i

i

n

= =

∑( )

1

2

Where:

VB=Baseline volume.

VI=Volume of gasoline batch i.

n=Total number of batches of gasoline

produced from January 1, 1997,

through December 31, 1998.

i=Individual batch of gasoline produced

from January 1, 1997, through

December 31, 1998.

(2) The small refiner sulfur baseline is

determined for each refinery as follows:

S

V S

V

b

i i

i

n

i

i

n =

×

=

=

∑

∑

( )

1

1

Where:

Sb=Small refiner sulfur baseline.

Vi=Volume of gasoline batch i.

Si=Sulfur content of batch i.

n=Total number of batches of gasoline

produced from January 1, 1997,

through December 31, 1998.

i=Individual batch of gasoline produced

from January 1, 1997, through

December 31, 1998.

(b) Foreign refiners who do not have

an approved refinery baseline under

§ 80.94 must follow the procedures

specified in § 80.410(b).

(c) If at any time a small refinery

baseline is determined to be incorrect,

the corrected baseline applies ab initio

and the annual average standards and

cap standards are deemed to be those

applicable under the corrected

information.

§ 80.255 Compliance plans and

demonstration of commitment to produce

low sulfur gasoline.

The requirements of this section

apply to any refiner approved for small

refiner standards who wishes to be

eligible for a hardship extension under

§ 80.260.

(a) Compliance commitment. By no

later than June 1, 2004, any refiner who

is approved for small refinery standards

must submit a preliminary report to

EPA which outlines the refiner’s

timeline for compliance and a project

plan which discusses permits, capital

commitments and engineering plans for

making the necessary modifications to

produce gasoline that meets the 30 ppm

refinery average and 80 ppm per-gallon

cap sulfur standards under § 80.195 on

or before January 1, 2008. Documents

showing activities and progress in these

areas should be provided, if available.

(b) Demonstration of Progress. (1)(i)

By no later than June 1, 2005, the small

refiner must submit a report to EPA that

states in detail the progress toward

compliance with the 30 ppm refinery

average and 80 ppm cap sulfur

standards to date based on their

timeline and project plan. The report

must include:

(A) Copies of approved permits for

construction of the equipment, or the

permit application if approval is still

pending;

(B) Copies of contracts for design and

construction; and

(C) Any available evidence of having

secured the necessary financing to

complete the required construction;

(ii) If the refiner anticipates any

difficulties in meeting its compliance

commitments under this section, the

refiner must submit a detailed report of

all efforts made to date and the factors

that may cause delay, including costs,

specification of engineering or other

design work needed and reasons for

delay, specification of equipment

needed and any reasons for delay,

potential equipment suppliers and

history of negotiations, and any other

relevant information. If unavailability of

equipment is a factor, the report must

include a discussion of other options

considered and the reasons these other

options are not feasible.

(2) By no later than June 1, 2006, the

small refiner must submit to EPA

evidence that on-site construction has

begun and that, absent unforeseen

difficulties, the small refiner will be

producing complying gasoline by

January 1, 2008. If construction has not

begun, the refiner must demonstrate that

it has made all reasonable efforts to

begin construction, that substantial

progress is being made to begin

construction as soon as possible, and

that construction can be completed in

time to begin production of gasoline that

complies with the standards of § 80.195

by January 1, 2008.

(c) Additional information. The

Administrator may request any

additional information necessary to

determine a refiner’s commitment and/

or progress toward meeting the

standards in § 80.195 by 2008.

(d) Failure to comply with

requirements. Any small refiner who

fails to submit the progress reports

required under this section will not be

eligible for a hardship extension under

§ 80.260.

§ 80.260 What are the procedures and

requirements for obtaining a hardship

extension?

(a) An approved small refiner who has

filed the reports specified in § 80.255

may apply to EPA for a hardship

extension of the small refiner standards

for calendar years 2008 and 2009. The

application must be submitted in

writing no later than January 1, 2007, to

U.S. EPA, Attn: Sulfur Program (6406J),

401 M Street, SW, Washington, DC

20460. For commercial (non-postal)

delivery: U.S. EPA, Attn: Sulfur

Program, 501 3rd Street NW,

Washington, DC 20001.

(b) The application must specify the

factors that demonstrate a significant

economic hardship and must provide a

detailed discussion regarding the

inability of the refinery to produce

gasoline meeting the requirements of

§ 80.195. Such an application must

include, at a minimum, the following

information:

(1) Documentation of efforts made to

obtain necessary financing, including:

(i) Copies of loan applications for the

necessary financing of the construction

of appropriate sulfur reduction

technology and other equipment

procurements or improvements; and

(ii) If financing has been disapproved

or is otherwise unsuccessful, documents

supporting the basis for that disapproval

and evidence of efforts to pursue other

means of financing;

(2) A detailed analysis of the reasons

the refinery is unable to produce

gasoline meeting the standards of

6830 Federal Register / Vol. 65, No. 28 / Thursday, February 10, 2000 / Rules and Regulations

§ 80.195 in 2008, including costs,

specification of equipment still needed,

potential equipment suppliers, and

efforts already completed to obtain the

necessary equipment;

(3) If unavailability of equipment is

part of the reason for the inability to

comply, a discussion of other options

considered, and the reasons these other

options are not feasible;

(4) If relevant, a demonstration that a

needed or lower cost technology is

immediately unavailable, but will be

available in the near future, and full

information regarding when and from

what sources it will be available;

(5) Schematic drawings of the refinery

configuration as of January 1, 1999, and

as of the date of the hardship extension

application, and any planned future

additions or changes;

(6) If relevant, a demonstration that a

temporary unavailability exists of

engineering or construction resources

necessary for design or installation of

the needed equipment;

(7) If sources of crude oil lower in

sulfur than what the refiner is currently

using are available, full information

regarding the availability of these

different crude sources, the sulfur

content of those crude sources, the cost

of the different crude sources over the

past five years, and an estimate of

gasoline sulfur levels achievable by the

refinery if the lower sulfur crude

sources were used;

(8) A discussion of any sulfur

reductions that can be achieved from

current levels;

(9) The date the refiner anticipates

compliance with the standards in

§ 80.195 can be achieved at its refinery;

(10) An analysis of the economic

impact of compliance on the refiner’s

business (including financial statements

from the last 5 years, or for any time

period up to 10 years, at EPA’s request);

and

(11) Any other information regarding

other strategies considered, including

strategies or components of strategies

that do not involve installation of

equipment, and why meeting the

standards in § 80.195 beginning in 2008

is infeasible.

(c) The hardship extension

application must contain a letter signed

by the president or the chief operating

or chief executive officer of the

company, or his/her designee, stating

that the information contained in the

application is true to the best of his/her

knowledge.

§ 80.265 How will the EPA approve or

disapprove a hardship extension

application?

(a) EPA will evaluate each application

for hardship extension on a case-by-case

basis. The factors considered for a

hardship extension may include: The

refiner’s financial position and efforts to

obtain capital funding; the refiner’s

efforts to procure necessary equipment,

obtain design and engineering services

and construction contractors; the

availability of desulfurization

equipment; and any other relevant

factor. An extension will be granted for

a refinery for the 2008 averaging period

if the small refiner who owns the

refinery adequately demonstrates that

severe economic hardship would result

if compliance with the standards in

§ 80.195 is required in 2008, or that

compliance with the standard in 2008 is

not feasible for reasons beyond the

refiner’s control, and that the refiner has

made the best efforts possible to achieve

compliance with the national standards

by January 1, 2008. Upon reapplication

by the refiner, if EPA determines that

further relief is appropriate, EPA may

grant a further extension through the

2009 averaging period. In no case will

a further extension for the 2009

averaging period be granted unless the

refiner demonstrates conclusively that it

has financing in place and that it will

be able to complete construction and

meet the national gasoline sulfur

standards no later than December 31,

2009.

(b) EPA may request more

information, if necessary, for evaluation

of the application. If requested

information is not submitted within the

time specified in EPA’s request, or any

extensions granted, the application may

be denied.

(c) EPA will notify the refiner of

approval or disapproval of hardship

extension by letter.

(1) If approved, EPA will also notify

the refiner of the date that full

compliance with the standards specified

at § 80.195 must be achieved or what

interim sulfur levels or schedules apply,

if any.

(2) If disapproved, beginning January

1, 2008, the refinery is subject to the

requirements in § 80.195. Refiners who

receive an extension for the 2008

averaging period shall meet the

standards in § 80.195 beginning on

January 1, 2009, unless EPA grants an

extension of the hardship relief for an

additional year. If such an additional

extension is granted, the refiner shall

meet the standards in § 80.195 on

January 1, 2010.

(d) Refiners who receive a hardship

extension may be required to meet more

stringent standards than those which

apply to them during 2007, and/or

could be required to offset excess sulfur

levels. EPA may impose reasonable

conditions on an extension, such as

requiring segregation of the small

refiner’s gasoline or requiring the

gasoline to be sold for use in older

vehicles only.

§ 80.270 Can a refiner seek temporary

relief from the requirements of this

subpart?

(a) EPA may permit a refiner to

produce and distribute gasoline which

does not meet the requirements of this

subpart if the refiner demonstrates that:

(1) Unusual circumstances exist that

impose extreme hardship and

significantly affect ability to comply by

the applicable date; and

(2) It has made best efforts to comply

with the requirements of this subpart

(including making efforts to obtain

credits and/or allotments).

(b) Applications must be submitted to

EPA by September 1, 2000. Relief may

be granted from some or all of the

requirements of this subpart, at EPA’s

discretion; however, EPA reserves the

right to deny applications for

appropriate reasons, including

unacceptable environmental impact.

Approval to distribute gasoline which

does not meet the requirements of this

subpart may be granted for such time

period as EPA determines is

appropriate, but shall not extend

beyond January 1, 2008.

(c)(1) Applications must include a

plan demonstrating how the refiner will

comply with the requirements of this

subpart as expeditiously as possible.

The plan shall include a showing that

contracts are or will be in place for

engineering and construction of

desulfurization equipment, a plan for

applying for and obtaining any permits

necessary for construction, a description

of plans to obtain necessary capital, and

a detailed estimate of when the

requirements of this subpart will be met.

(2) Applications must include a

detailed description of the refinery

configuration and operations, including,

at a minimum, the following

information:

(i) The portion of gasoline production

that is produced using an FCC unit;

(ii) The refinery’s hydrotreating

capacity;

(iii) The refinery’s total reformer unit

throughput capacity;

(iv) The refinery’s total crude

capacity;

(v) Total crude capacity of any other

refineries owned by the same entity;

(vi) Total volume of gasoline

production at the refinery;

(vii) Total volume of other refinery

products; and

(viii) Geographic location(s) in which

gasoline will be sold.

(3) Applications must include, at a

minimum, the following information:

Federal Register / Vol. 65, No. 28 / Thursday, February 10, 2000 / Rules and Regulations 6831

(i) Detailed description of efforts to

obtain capital for refinery investments;

(ii) Bond rating of entity that owns the

refinery; and

(iii) Estimated capital investment

needed to comply with the requirements

of this subpart by the applicable date.

(4) Applicants must also provide any

other relevant information requested by

EPA.

(d) EPA may impose any reasonable

conditions on waivers granted under

this section.

Allotment Trading Program

§ 80.275 How are allotments generated

and used?

(a) Generation of allotments and

credits in 2003. (1) During 2003 only,

any domestic or foreign refiner may

have the option to generate credits in

accordance with the provisions of

§ 80.305 or generate allotments and

credits under paragraph (a)(2) of this

section.

(2) If the average sulfur content of the

gasoline produced at a refinery is less

than the refinery’s baseline as

determined under § 80.295 and is 60

ppm or less, allotments and credits may

be generated using the following

procedures. This paragraph (a) does not

apply to importers.

(i) If the average sulfur content of the

gasoline produced at a refinery is less

than or equal to 30, and the refinery’s

sulfur baseline is greater than 120, the

following procedures apply:

SATypeB = (30 ¥ Saa) × V

SATypeA = (V × 90) × 0.8

CR = (SBase ¥ 120) × V

(ii) If the average sulfur content of the

gasoline produced at a refinery is less

than or equal to 30, and the refinery’s

sulfur baseline is greater than 30 but

less than or equal to 120, the following

procedures apply:

SATypeB = (30 ¥ Sa) × V

SATypeA = ((SBase ¥ 30) × V) × 0.8

(iii) If the average sulfur content of the

gasoline produced at a refinery is less

than or equal to 30, and the refinery’s

sulfur baseline is less than or equal to

30, the following procedures apply:

SATypeB = ( SBase ¥ Sa) × V

(iv) If the average sulfur content of the

gasoline produced at a refinery is greater

than 30, and the refinery’s sulfur

baseline is greater than 120, the

following procedures apply:

SATypeA = ((120 ¥ Sa) × V) × 0.8

CR = (SBase ¥ 120) × V

(v) If the average sulfur content of the

gasoline produced at a refinery is greater

than 30, and the refinery’s sulfur

baseline is less than or equal to 120, the

following procedures apply:

SATypeA = ((SBase ¥ Sa) × V) × 0.8

(vi) For purposes of the equations

under paragraphs (a)(2)(i) through (v) of

this section, the following definitions

apply:

SATypeB = Type B sulfur allotments

generated.

SATypeA = Type A sulfur allotments

generated.

CR = Credits generated.

SBase = Refinery’s sulfur baseline value

under § 80.295.

Sa = Average sulfur content of the

gasoline produced at the refinery

during 2003 (or for a foreign

refinery, all gasoline produced

during 2003 that was imported into

the U.S.).

V = Volume of gasoline produced at the

refinery during 2003 (or for a

foreign refinery, all gasoline

produced during 2003 that was

imported into the U.S.).

(b) Generation of allotments in 2004

and 2005. During 2004 and 2005 only,

refiners and importers that have

corporate pool average sulfur levels

below the corporate pool average

standards under § 80.195 may generate

sulfur allotments separately for each

year using the following procedures.

(1) If the average sulfur content of the

gasoline produced or imported is less

than 30 the following procedures apply:

SATypeB = (30 ¥ Sa) × Va

SATypeA = (SPS ¥ 30) × Va

(2) If the average sulfur content of the

gasoline produced or imported is equal

to or greater than 30 the following

procedures apply:

SATypeA = (SPS ¥ Sa) × Va

(3) For purposes of the equations

under paragraphs (b)(1) and (2) of this

section, the following definitions apply:

SATypeB = Type B sulfur allotments

generated.

SATypeA = Type A sulfur allotments

generated.

Sa = Corporate pool average sulfur level

for the year.

SPS = Corporate pool average standard

(120 in 2004; 90 in 2005).

Va = Total volume of gasoline produced

and/or imported during the year.

(c) Use of sulfur allotments to meet

standards. (1) Refiners and importers

may use Type A and Type B sulfur

allotments to meet the corporate pool

average standards under § 80.195,

except that if allotments generated in

2003 or 2004 are used to meet the

corporate pool standard in 2005 the

allotments generated in 2003 or 2004

shall be reduced in value by 50%.

(2) Small refiners subject to the

standards under § 80.240, and refiners

and importers of gasoline designated as

GPA gasoline under § 80.219(a), may

use sulfur allotments to meet their

annual average refinery or importer

standards.

(d) Transfers of sulfur allotments.

Sulfur allotments generated under this

section may be transferred, provided

that:

(1) No allotment may be transferred

more than twice: The first transfer by

the refiner or importer who generated

the allotment may only be made to a

refiner or importer who intends to use

the allotment; if the transferee cannot

use the allotment, it may make the

second, and final, transfer only to a

refiner or importer who intends to use

the allotment. In no case may an

allotment be transferred more than

twice before being used or terminated.

(2) The allotment transferor must

apply any allotments necessary to meet

the transferor’s corporate pool average

standard before transferring allotments

to any other refiner or importer or before

converting allotments into credits.

(3) The transferor must supply to the

transferee records indicating the year of

generation and type of the allotments,

the identity of the refiner or importer

who generated the allotments, and the

identity of the transferring party, if it is

not the same part that generated the

allotments.

(4) The transferor must inform the

transferee whether any transferred

allotments are Type A allotments or

Type B allotments, as defined in

paragraphs (a) and (b) of this section.

(5) In the case of allotments that have

been calculated or created improperly,

or are otherwise determined to be

invalid, the following provisions apply:

(i) Invalid allotments cannot be used

to achieve compliance with the

transferee’s corporate pool average

standard or be converted to credits,

regardless of the transferee’s good faith

belief that the allotments were valid.

(ii) The refiner or importer who used

the allotments, and any transferor of the

allotments, must adjust their allotment

records and reports and sulfur

calculations as necessary to reflect the

proper allotments.

(iii) Any allotments remaining after

correcting for the improperly created

allotments must first be applied to

correct the invalid transfers before the

transferor may transfer any other

allotments or before converting

allotments into credits.

(e) Conversion of allotments into

credits. A refiner or importer may

convert allotments into credits using the

following procedures:

(1) Type A allotments may be

converted into credits with the same

requirements and limitations on use that

6832 Federal Register / Vol. 65, No. 28 / Thursday, February 10, 2000 / Rules and Regulations

apply under § 80.315 to credits

generated in 2000 through 2003.

(2) Type B allotments may be

converted into credits with the same

requirements and limitations on use that

apply under § 80.315 to credits

generated in 2004 and later, based on

the year of creation of the allotment.

(f) Small refiners. Small refiners

subject to the standards under § 80.240

may not generate sulfur allotments

under paragraph (b) of this section.

(g) GPA gasoline. GPA gasoline that is

included in the refiner’s or importer’s

corporate pool average under

§ 80.216(f)(2) must be included in the

calculations under paragraph (b) of this

section. No refiner or importer may

generate allotments in 2004 or 2005 who

is not required to meet the corporate

pool average standards.

Averaging, Banking and Trading (ABT)

Program—General Information

§ 80.280 [Reserved]

§ 80.285 Who may generate credits under

the ABT program?

(a) Credit generation in 2000 through

2003. (1) Credits may be generated in

2000 through 2003 under § 80.305 by

refiners who produce gasoline from

crude oil, and are:

(i) Refiners who establish a sulfur

baseline under § 80.295;

(ii) Foreign refiners with approved

baselines under § 80.94, or baselines

established in accordance with § 80.410;

or

(iii) Small refiners for any refinery

subject to the standards under § 80.240,

using their small refiner baseline

established under § 80.250.

(2) Importers and oxygenate blenders

may not generate credits under § 80.305.

(b) Credit generation beginning in

2004. (1) Credits may be generated

beginning in 2004 under § 80.310 by:

(i) Refiners and importers subject to

the standards under § 80.195;

(ii) Refiners and importers of gasoline

designated as GPA gasoline under

§ 80.219, using the lesser of: 150 ppm;

or the refiner’s or importer’s baseline

calculated under § 80.295; or the

refinery’s lowest annual average sulfur

content for any year from 2000 through

2003 during which the refiner generated

credits (for any party generating credits

under both paragraph (b)(1)(i) of this

section and this paragraph (b)(1)(ii),

such credits must be calculated

separately); or

(iii) Small refiners for any refinery

subject to the standards under § 80.240,

using refinery’s standard established

under § 80.240.

(2) Generation of credits for all

imported gasoline shall be through the

importer.

(3) Oxygenate blenders may not

generate credits under § 80.310.

§ 80.290 How does a refiner apply for a

sulfur baseline?

(a) The refiner must submit an

application to EPA which includes the

information required under paragraph

(c) of this section no later than

September 30 of the year in which the

refiner plans to begin generating credits,

or the refiner or an importer plans to

sell gasoline in the geographic phase-in

area in accordance with § 80.217.

(b) The sulfur baseline request must

be sent to: U.S. EPA, Attn: Sulfur

Program (6406J), 401 M Street SW.,

Washington, DC 20460. For commercial

(non-postal) delivery: U.S. EPA, Attn:

Sulfur Program, 501 3rd Street NW.,

Washington, DC 20001.

(c) The sulfur baseline application

must include the following information:

(1) A listing of the names and

addresses of all refineries owned by the

corporation for which the refiner is

applying for a sulfur baseline.

(2) The annual average gasoline sulfur

baseline for gasoline produced in 1997–

1998, for each refinery for which the

refiner is applying for a sulfur baseline,

calculated in accordance with § 80.295.

(3) A letter signed by the president,

chief operating or chief executive

officer, of the company, or his/her

delegate, stating that the information

contained in the sulfur baseline

determination is true to the best of his/

her knowledge.

(4) Name, address, phone number,

facsimile number and E-mail address of

a corporate contact person.

(5) The following information for each

batch of gasoline produced in 1997–

1998:

(i) Batch number assigned to the batch

under § 80.65(d) or § 80.101(i);

(ii) Volume; and

(iii) Sulfur content.

(d) Foreign refiners who do not have

an approved refinery baseline under

§ 80.94 must follow the procedures

specified in § 80.410(b).

(e) Within 60 days of receipt of an

application under this section, EPA will

notify the refiner of approval of the

refinery’s baseline or of any deficiencies

in the application.

(f) If at any time the baseline

submitted in accordance with the

requirements of this section is

determined to be incorrect, EPA will

notify the refiner of the corrected

baseline.

(g) Any refiner that seeks temporary

relief under § 80.270 shall apply for a

refinery sulfur baseline in accordance

with the provisions of this section and

§ 80.295, and if applicable, § 80.410(b),

no later than September 1, 2000.

ABT Program—Baseline Determination

§ 80.295 How is a refinery sulfur baseline

determined?

(a) A refinery’s gasoline sulfur

baseline for the purpose of generating

credits during years 2000 through 2003

is calculated using the following

equation:

S

Vi Si

Vi

Base

i

n

i

n =

( ) ×

=

=

∑

∑

1

1

Where:

SBase=Sulfur baseline value.

Vi=Volume of gasoline batch i.

Si=Sulfur content of gasoline batch i.

n=Total number of batches of gasoline

produced during January 1, 1997

through December 31, 1998.

i=Individual batch of gasoline produced

during January 1, 1997 through

December 31, 1998.

(b) Any refiner who, under § 80.65 or

§ 80.101(d)(4), included oxygenate

blended downstream in compliance

calculations for 1997–1998 must

include this oxygenate in the baseline

calculations for sulfur content under

paragraph (a) of this section.

§ 80.300 [Reserved]

ABT Program—Credit Generation

§ 80.305 How are credits generated during

the time period 2000 through 2003?

(a) Credits must be calculated as

follows:

CRa=Va × (SBase ¥ Sa)

Where:

CRa=Credits generated for the averaging

period.

Va=Total volume of gasoline produced

during the averaging period at the

refinery.

SBase=Sulfur baseline value for the

refinery established under § 80.250

or § 80.295.

Sa=Actual annual average sulfur level

for gasoline produced during the

averaging period by the refinery

exclusive of any credits.

(b) The refiner may include any

oxygenates included in its RFG or

conventional gasoline volume under

§§ 80.65 and 80.101(d)(4), respectively,

for the purpose of generating credits.

(c) Credits under this program are in

units of ‘‘ppm-gallons’’.

(d) Refiners may generate credits for

gasoline produced during an averaging

period only if the annual average sulfur

level for the gasoline produced during

the averaging period is less than 0.90 of

the refiners baseline under § 80.250 or

§ 80.295.

Federal Register / Vol. 65, No. 28 / Thursday, February 10, 2000 / Rules and Regulations 6833

(e) Credits generated in accordance

with paragraph (a) of this section must

be identified by the year of creation.

§ 80.310 How are credits generated

beginning in 2004?

(a) A refiner for any refinery, or an

importer, may generate credits in 2004

and thereafter if the annual average

sulfur level for gasoline produced or

imported for the averaging period is less

than the applicable refinery or importer

annual average sulfur standard for that

refinery or importer in that year.

(b) Credits are calculated as follows:

CRa=Va × (SStd ¥ Sa)

Where:

CRa=Credits generated for the averaging

period.

Va=Total annual volume gasoline

produced at a refinery or imported

during the averaging period.

Sstd=30 ppm; or the sulfur standard for

a small refinery established under

§ 80.240; or, for gasoline designated

as GPA gasoline under § 80.219, the

lesser of 150 ppm, the refinery’s or

importer’s baseline calculated

under § 80.295, or the refinery’s

lowest annual average sulfur

content for any year from 2000

through 2003 during which the

refinery generated credits or

allotments.

Sa=Actual annual average sulfur level of

gasoline produced at a refinery or

imported during the averaging

period exclusive of any credits.

(c) Credits generated in accordance

with this section must be identified by

the year of creation.

ABT Program—Credit Use

§ 80.315 How are credits used and what

are the limitations on credit use?

(a) Credit use. Credits may be used to

meet the applicable refinery or importer

annual average sulfur standards under

§ 80.195, § 80.216, or § 80.240, provided

that:

(1) Sulfur credits used were generated

pursuant to the requirements of this

subpart; and

(2) The requirements of paragraphs (b)

and (c) of this section are met.

(b) Credit transfers. (1) Credits

obtained from other persons may be

used to meet the annual average

standards specified in § 80.195,

§ 80.216, or § 80.240 if all the following

conditions are met:

(i) The credits are generated and

reported according to the requirements

of this subpart.

(ii) The credits are used in

compliance with the limitations

regarding the appropriate periods for

credit use in this subpart.

(iii) Any credit transfer takes place no

later than the last day of February

following the calendar year averaging

period when the credits are used.

(iv) No credit may be transferred more

than twice: The first transfer by the

refiner or importer who generated the

credit may only be made to a refiner or

importer who intends to use the credit;

if the transferee cannot use the credit, it

may make the second, and final, transfer

only to a refiner or importer who

intends to use the credit. In no case may

a credit be transferred more than twice

before being used or terminated.

(v) The credit transferor must apply

any credits necessary to meet the

transferor’s applicable average standard

before transferring credits to any other

refiner or importer.

(vi) No credits may be transferred that

would result in the transferor having a

negative credit balance.

(vii) Each transferor must supply to

the transferee records indicating the

years the credits were generated, the

identity of the refiner or importer who

generated the credits, and the identity of

the transferring party, if it is not the

same party that generated the credits.

(2) In the case of credits that have

been calculated or created improperly,

or are otherwise determined to be

invalid, the following provisions apply:

(i) Where a refiner’s baseline has been

determined to be incorrect under

§ 80.250(c) or § 80.290(f), any credits

generated, banked, used or traded must

be adjusted to reflect the corrected

baseline.

(ii) Invalid credits cannot be used to

achieve compliance with the

transferee’s averaging standard,

regardless of the transferee’s good faith

belief that the credits were valid.

(iii) The refiner or importer who used

the credits, and any transferor of the

credits, must adjust their credit records

and reports and sulfur calculations as

necessary to reflect the proper credits.

(iv) Any properly created credits

existing in the transferor’s credit

balance after correcting the credit

balance, and after the transferor applies

credits as needed to meet the average

standard at the end of the compliance

year, must first be applied to correct the

invalid transfers before the transferor

trades or banks the credits.

(c) Limitations on credit use. (1)

Credits generated prior to 2004 may

only be used for demonstrating

compliance with the refinery or

importer annual average standards

under § 80.195 during the 2005 and

2006 averaging periods. Such credits

may be used to demonstrate compliance

with the standards under § 80.216

during the 2004 through 2006 averaging

periods, and with the standards under

§ 80.240 during the 2004 through 2007

averaging periods, and the 2008 and

2009 averaging periods, if allowed

under the terms of a hardship extension

under § 80.265.

(2) Credits generated in 2004 or later

may only be used for demonstrating

compliance with standards during an

averaging period within five years of the

year of generation.

(3) A refiner or importer possessing

credits must use all credits prior to

falling into compliance deficit under

§ 80.205(e).

(4) Credits may not be used to meet

corporate pool average standards under

§ 80.195.

§ 80.320 [Reserved]

§ 80.325 [Reserved]

Sampling, Testing and Retention

Requirements for Refiners and

Importers

§ 80.330 What are the sampling and

testing requirements for refiners and

importers?

(a) Sample and test each batch of

gasoline. (1) Refiners and importers

shall collect a representative sample

from each batch of gasoline produced or

imported and test each sample to

determine its sulfur content for

compliance with requirements under

this subpart prior to the gasoline leaving

the refinery or import facility, using the

sampling and testing methods provided

in this section.

(2) Except as provided in paragraph

(a)(3) of this section, the requirements of

this section apply beginning January 1,

2004, or January 1 of the first year of

allotment or credit generation under

§ 80.275 or § 80.305, whichever is

earlier.

(3) Prior to January 1, 2004, for

purposes of meeting the sampling and

testing requirements of this section for

conventional gasoline, any refiner may,

prior to analysis, combine samples of

gasoline from more than one batch of

gasoline or blendstock and treat such

composite sample as one batch of

gasoline or blendstock pursuant to the

requirements of § 80.101(i)(2).

(4) Any refiner who produces

reformulated gasoline or conventional

gasoline using computer-controlled inline blending equipment may meet the

testing requirement of paragraph (a)(1)

of this section under the terms of an

exemption granted under § 80.65(f)(4).

(b) Sampling methods. For purposes

of paragraph (a) of this section, refiners

and importers shall sample each batch

of gasoline by using one of the following

methods:

6834 Federal Register / Vol. 65, No. 28 / Thursday, February 10, 2000 / Rules and Regulations

(1) Manual sampling of tanks and

pipelines shall be performed according

to the applicable procedures specified

in one of the two following methods:

(i) American Society for Testing and

Materials (ASTM) method D 4057–95,

entitled ‘‘Standard Practice for Manual

Sampling of Petroleum and Petroleum

Products.’’

(ii) Samples collected under the

applicable procedures in ASTM method

D 5842–95, entitled ‘‘Standard Practice

for Sampling and Handling of Fuels for

Volatility Measurement,’’ may be used

for measuring sulfur content if there is

no contamination present that could

affect the sulfur test result.

(2) Automatic sampling of petroleum

products in pipelines shall be

performed according to the applicable

procedures specified in ASTM method

D 4177–95, entitled ‘‘Standard Practice

for Automatic Sampling of Petroleum

and Petroleum Products.’’

(c) Test method for measuring the

sulfur content of gasoline. (1) For

purposes of paragraph (a) of this section,

refiners and importers shall use the

method provided in § 80.46(a)(1) to

measure the sulfur content of gasoline

they produce or import.

(2) Except as provided in § 80.350 and

in paragraph (c)(1) of this section, any

ASTM sulfur test method for liquefied

fuels may be used for quality assurance

testing under § 80.400, or to determine

whether gasoline qualifies for a S–RGAS

downstream standard, if the protocols of

the ASTM method are followed and the

alternative method is correlated to the

method provided in § 80.46(a)(1).

(d) Test method for sulfur in butane.

(1) Refiners and importers shall use the

method provided in § 80.46(a)(2) to

measure the sulfur content of butane

when the butane constitutes a batch of

gasoline.

(2) Except as provided in paragraph

(d)(1) of this section, any ASTM sulfur

test method for gaseous fuels may be

used for quality assurance testing under

§§ 80.340(b)(4) and 80.400, if the

protocols of the ASTM method are

followed and the alternative method is

correlated to the method provided in

§ 80.46(a)(2).

(e) Incorporations by reference. ASTM

standard practices D 4057–95, D 4177–

95 and D 5842–95 are incorporated by

reference. These incorporations by

reference were approved by the Director

of the Federal Register in accordance

with 5 U.S.C. 552(a) and 1 CFR part 51.

Copies may be obtained from the

American Society for Testing and

Materials, 100 Barr Harbor Dr., West

Conshohocken, PA 19428. Copies may

be inspected at the Air Docket Section

(LE–131), room M–1500, U.S.

Environmental Protection Agency,

Docket No. A–97–03, 401 M Street, SW.,

Washington, DC 20460, or at the Office

of the Federal Register, 800 North

Capitol Street, NW., Suite 700,

Washington, DC.

§ 80.335 What gasoline sample retention

requirements apply to refiners and

importers?

(a) Sample retention requirements.

Beginning January 1, 2004, or January 1

of the first year allotments or credits are

generated under §§ 80.275 and 80.305,

whichever is earlier, any refiner or

importer shall:

(1) Collect a representative portion of

each sample analyzed under § 80.330(a),

of at least 330 ml in volume;

(2) Retain sample portions for the

most recent 20 samples collected, or for

each sample collected during the most

recent 21 day period, whichever is

greater;

(3) Comply with the gasoline sample

handling and storage procedures under

§ 80.330(b) for each sample portion

retained; and

(4) Comply with any request by EPA

to:

(i) Provide a retained sample portion

to the Administrator’s authorized

representative; and

(ii) Ship a retained sample portion to

EPA, within 2 working days of the date

of the request, by an overnight shipping

service or comparable means, to the

address and following procedures

specified by EPA, and accompanied

with the sulfur test result for the sample

determined under § 80.330(a).

(b) Sample retention requirement for

samples subject to independent analysis

requirements. (1) Any refiner or

importer who meets the independent

analysis requirements under § 80.65(f)

for any batch of reformulated gasoline or

RBOB will have met the requirements of

paragraph (a) of this section, provided

the independent laboratory meets the

requirements of paragraph (a) of this

section for the gasoline batch.

(2) For samples retained by an

independent laboratory under paragraph

(b) of this section, the test results

required to be submitted under

paragraph (a) of this section shall be the

test results determined under § 80.65(e).

(c) Sampling compliance certification.

Any refiner or importer shall include

with each annual report filed under

§ 80.370, the following statement, which

must accurately reflect the facts and

must be signed and dated by the same

person who signs the annual report:

I certify that I have made inquiries that are

sufficient to give me knowledge of the

procedures to collect and store gasoline

samples, and I further certify that the

procedures meet the requirements of the

ASTM procedures required under 40 CFR

80.330.

§ 80.340 What standards and requirements

apply to refiners producing gasoline by

blending blendstocks into previously

certified gasoline (PCG)?

(a) Any refiner who produces gasoline

by blending blendstock into PCG must

meet the requirements of § 80.330 to

sample and test every batch of gasoline

as follows:

(1)(i) Sample and test to determine the

volume and sulfur content of the PCG

prior to blendstock blending.

(ii) Sample and test to determine the

volume and sulfur content of the

gasoline subsequent to blendstock

blending.

(iii) Calculate the volume and sulfur

content of the blendstock, by subtracting

the volume and sulfur content of the

PCG from the volume and sulfur content

of the gasoline subsequent to blendstock

blending. The blendstock is a batch for

purposes of compliance calculations

and reporting. For purposes of this

paragraph (a), compliance with the

applicable cap standard under

§ 80.195(a) shall be determined based on

the sulfur content of the gasoline

subsequent to blendstock blending.

(2) In the alternative, a refiner may

sample and test each batch of

blendstock when received at the

refinery to determine the volume and

sulfur content, and treat each

blendstock receipt as a separate batch

for purposes of compliance calculations

for the annual average sulfur standard

and for reporting. This alternative

applies only if every batch of blendstock

used at a refinery during an averaging

period has a sulfur content that is equal

to, or less than, the applicable pergallon cap standard under §§ 80.195 or

80.216.

(b) Refiners who blend only butane

into PCG may meet the sampling and

testing requirements by using sulfur test

results of the butane supplier, provided

that the following requirements are also

met:

(1) The sulfur content of the butane

received from the butane supplier must

not exceed the following sulfur

standards on a per-gallon basis as

follows:

(i) 120 ppm in 2004, and 30 ppm for

2005 and any subsequent year;

(ii) Except that the per-gallon sulfur

content of butane blended to PCG that

is designated as GPA gasoline shall not

exceed 150 ppm from January 1, 2004,

through December 31, 2006.

(2) The refiner obtains test results

from the butane supplier that

demonstrate that the sulfur content of

Federal Register / Vol. 65, No. 28 / Thursday, February 10, 2000 / Rules and Regulations 6835

each load of butane supplied does not

exceed the applicable per-gallon sulfur

standard under paragraph (b)(1) of this

section through test results of samples

of the butane contained in the storage

tank from which the butane blender is

supplied.

(i) Testing for the sulfur content of the

butane by the supplier must be

subsequent to each receipt of butane

into the supplier’s storage tank, or the

testing must be immediately before

transfer of butane to the butane blender.

(ii) The testing must be performed by

the method specified in § 80.46(a)(2).

(iii) The butane blender must obtain

a copy of the butane supplier’s test

results, at the time of each transfer of

butane to the butane blender, that reflect

the sulfur content of each load of butane

supplied to the butane blender.

(3) The sulfur content and volume of

each batch of gasoline produced is that

of the butane the refiner blends into

gasoline for purposes of calculating

compliance with the standards in

§§ 80.195 and 80.216.

(4) The refiner must conduct a quality

assurance program of sampling and

testing for each butane supplier that

demonstrates the butane sulfur content

does not exceed the applicable pergallon sulfur standard in paragraph

(b)(1) of this section. The frequency of

butane sampling and testing, for each

butane supplier, must be one sample for

every 500,000 gallons of butane

received, or one sample every 3 months,

whichever results in more frequent

sampling.

(5) If any of the requirements of this

section are not met, in whole or in part,

for any butane blended into gasoline,

that butane is deemed in violation of the

gasoline sulfur standards in § 80.195 or

§ 80.216, as applicable.

§ 80.345 [Reserved]

§ 80.350 What alternative sulfur standards

and requirements apply to importers who

transport gasoline by truck?

Importers who import gasoline into

the United States by truck may comply

with the following requirements instead

of the requirements to sample and test

every batch of gasoline under § 80.330,

and the annual sulfur average and pergallon cap standards otherwise

applicable to importers under §§ 80.195

and 80.216:

(a) Alternative standards. The

imported gasoline must comply with the

standards in paragraph (a)(1) or (a)(2) of

this section as follows:

(1) The applicable average standards,

corporate average standards and pergallon standards under § 80.195(a)(1),

except that imported gasoline

designated for use in the geographic

phase-in area from January 1, 2004,

through December 31, 2006 must

comply with an average standard of 150

ppm and a per-gallon standard of 300

ppm; or

(2) In 2004, a per-gallon standard of

120 ppm, and in 2005 and subsequent

years a per-gallon standard of 30 ppm,

except that imported gasoline

designated for use in the geographic

phase-in area from January 1, 2004,

through December 31, 2006 must

comply with a per-gallon standard of

150 ppm.

(b) Terminal testing. The importer

may use test results for sulfur content

testing conducted by the terminal

operator, for gasoline contained in the

storage tank from which trucks used to

transport gasoline into the United States

are loaded, for purposes of

demonstrating compliance with the

standards in paragraph (a) of this

section, provided the following

conditions are met:

(1) The sampling and testing shall be

performed after each receipt of gasoline

into the storage tank, or immediately

before each transfer of gasoline to the

importer’s truck.

(2) The sampling and testing shall be

performed using the methods specified

in § 80.330(b) and 80.46(a)(1),

respectively.

(3) At the time of each transfer of

gasoline to the importer’s truck for

import to the U.S., the importer must

obtain a copy of the terminal test result

that indicates the sulfur content of the

truck load.

(c) Quality assurance program. The

importer must conduct a quality

assurance program, as specified in this

paragraph, for each truck loading

terminal.

(1) Quality assurance samples must be

obtained from the truck-loading

terminal and tested by the importer, or

by an independent laboratory, and the

terminal operator must not know in

advance when samples are to be

collected.

(2) The sampling and testing must be

performed using the methods specified

in §§ 80.330(b) and 80.46(a)(1),

respectively.

(3) The quality assurance test results

for sulfur must differ from the terminal

test result by no more than the ASTM

reproducibility of the terminal’s test

results, as determined by the following

equation:

R = 105× ((S+2)/104)0.4

Where:

R = ASTM reproducibility.

S = Sulfur content based on the

terminal’s test result.

(4) The frequency of the quality

assurance sampling and testing must be

at least one sample for each fifty of an

importer’s trucks that are loaded at a

terminal, or one sample per month,

whichever is more frequent.

(d) Party required to conduct quality

assurance testing. The quality assurance

program under paragraph (c) of this

section shall be conducted by the

importer. In the alternative, this testing

may be conducted by an independent

laboratory that meets the criteria under

§ 80.65(f)(2)(iii), provided the importer

receives, no later than 21 days after the

sample was taken, copies of all results

of tests conducted.

(e) Assignment of batch numbers. The

importer must treat each truck load of

imported gasoline as a separate batch for

purposes of assigning batch numbers

and maintaining records under § 80.365,

and reporting under § 80.370.

(f) EPA inspections of terminals. EPA

inspectors or auditors, and auditors

conducting attest engagements under

§ 80.415, must be given full and

immediate access to the truck-loading

terminal and any laboratory at which

samples of gasoline collected at the

terminal are analyzed, and must be

allowed to conduct inspections, review

records, collect gasoline samples, and

perform audits. These inspections or

audits may be either announced or

unannounced.

(g) Certified Sulfur-FRGAS. This

section does not apply to Certified

Sulfur-FRGAS.

(h) Reporting requirements. Any

importer who elects to comply with the

alternative standards in paragraph (a) of

this section shall comply with the

following requirements:

(1) All importer recordkeeping and

reporting requirements under §§ 80.365

and 80.370, except as provided in

paragraph (h)(2) of this section.

(2) An importer who elects to comply

with the alternative standards in

paragraph (a)(2) of this section must

certify in the annual report whether it

is in compliance with the applicable

per-gallon batch standard set forth in

paragraph (a)(2) of this section, in lieu

of providing the information required by

§ 80.370(a) regarding annual average

sulfur content and compliance with the

average standard under § 80.195.

(i) Effect of noncompliance. If any of

the requirements of this section are not

met, all gasoline imported by the truck

importer during the time any

requirements are not met is deemed in

violation of the gasoline sulfur average

and per-gallon cap standards in § 80.195

or § 80.216, as applicable. Additionally,

if any requirement is not met, EPA may

notify the importer of the violation and,

6836 Federal Register / Vol. 65, No. 28 / Thursday, February 10, 2000 / Rules and Regulations

if the requirement is not fulfilled within

10 days of notification, the truck

importer may not in the future use the

sampling and testing provisions in this

section in lieu of the provisions in

§ 80.330.

§ 80.355 [Reserved]

Recordkeeping and Reporting

Requirements

§ 80.360 [Reserved]

§ 80.365 What records must be kept?

(a) Records that must be kept.

Beginning January 1, 2004, any person

who produces, imports, sells, offers for

sale, dispenses, distributes, supplies,

offers for supply, stores, or transports

gasoline, shall keep records that contain

the following information:

(1) The product transfer document

information required under §§ 80.77,

80.106, 80.210 and 80.219; and

(2) For any sampling and testing for

sulfur content required under this

subpart:

(i) The location, date, time and storage

tank or truck identification for each

sample collected;

(ii) The name and title of the person

who collected the sample and the

person who performed the test;

(iii) The results of the test as

originally printed by the testing

apparatus, or where no printed result is

produced, the results as originally

recorded by the person who performed

the test; and

(iv) Any record that contains a test

result for the sample that is not identical

to the result recorded under paragraph

(a)(2)(iii) of this section.

(b) Additional records that refiners

and importers must keep. Beginning

January 1, 2004, or January 1 of the first

year allotments or credits are generated

under § 80.275 or § 80.305, whichever is

earlier, any refiner for each of its

refineries, and any importer for the

gasoline it imports, shall keep records

that include the following information:

(1) For each batch of gasoline

produced or imported:

(i) The batch volume;

(ii) The batch number assigned under

§ 80.65(d)(3) and the appropriate

designation under paragraph (b)(1)(i) of

this section; except that if composite

samples of conventional gasoline

representing multiple batches produced

subsequent to December 31, 2003, are

tested under § 80.101(i)(2) for antidumping compliance purposes, for

purposes of this subpart a separate batch

number must be assigned to each batch

using the batch numbering procedures

under § 80.65(d)(3);

(iii) The date of production or

importation; and

(iv) If appropriate, the designation of

the batch as GPA gasoline under

§ 80.219, California gasoline under

§ 80.375, exempt gasoline for research

and development under § 80.380, or for

export outside the United States.

(2) Information regarding credits and

allotments, separately kept for credits

and for allotments; separately kept

according to the year of creation for the

credits and for the allotments; and for

credit generation or use starting in 2004,

separately kept for GPA gasoline and

other gasoline. Information shall be kept

separately for different types of

allotments and credits generated under

§§ 80.275(e)(1), 80.275(e)(2), 80.305 and

80.310:

(i) The number in the refiner’s or

importer’s possession at the beginning

of the averaging period;

(ii) The number generated;

(iii) The number used;

(iv) If any were obtained from or

transferred to other parties, for each

other party its name, its EPA refiner or

importer registration number, and the

number obtained from, or transferred to,

the other party;

(v) The number that expired at the

end of the averaging period;

(vi) The number of allotments, by

type, that were converted into credits

under § 80.275(e);

(vii) The number in the refiner’s or

importer’s possession that will carry

over into the subsequent averaging

period; and

(viii) Contracts or other commercial

documents that establish each transfer

of credits and allotments from the

transferor to the transferee.

(3) The calculations used to determine

the applicable refiner baseline under

§ 80.250 or § 80.295.

(4) The calculations used to determine

compliance with the applicable sulfur

average standards of § 80.195, § 80.216,

§ 80.240, or § 80.270.

(5) The calculations used to determine

the number of credits or allotments

generated under § 80.305, § 80.310 or

§ 80.275.

(6) The calculations used to determine

any applicable adjusted cap standard

under § 80.195(d).

(7) A copy of all reports submitted to

EPA under § 80.370.

(c) Additional records importers must

keep. Any importer shall keep records

that identify and verify the source of

each batch of certified Sulfur-FRGAS

and non-certified Sulfur-FRGAS

imported and demonstrate compliance

with the requirements for importers

under § 80.410(o).

(d) Length of time records must be

kept. The records required in this

section shall be kept for five years from

the date they were created; except that:

(1) Transfers of credits and

allotments. Records relating to credit

and allotment transfers, except as

provided in paragraph (d)(2) of this

section, shall be kept by the transferor

for 5 years from the date the credits or

allotments are transferred, and shall be

kept by the transferee for 5 years from

the date the credits or allotments were

transferred, used or terminated,

whichever is later.

(2) Early credits. (i) Where the party

generating the credits does not transfer

the credits, records must be kept for 5

years from the date of creation, use or

termination whichever is later.

(ii) Where early credits are

transferred, records relating to such

credits shall be kept by both parties for

5 years from the date the credits were

transferred, used or terminated,

whichever is later.

(e) Make records available to EPA. On

request by EPA the records required in

paragraphs (a), (b) and (c) of this section

shall be provided to the Administrator’s

authorized representative. For records

that are electronically generated or

maintained the equipment and software

necessary to read the records shall be

made available, or if requested by EPA,

electronic records shall be converted to

paper documents which shall be

provided to the Administrator’s

authorized representative.

§ 80.370 What are the sulfur reporting

requirements?

Beginning with the 2004 averaging

period, or the first year credits or

allotments are generated under § 80.275

or § 80.305, whichever is earlier, and

continuing for each averaging period

thereafter, any refiner or importer shall

submit to EPA annual reports that

contain the information required in this

section, and such other information as

EPA may require.

(a) Refiner and importer annual

reports. Any refiner, for each of its

refineries, and any importer for the

gasoline it imports, shall submit a report

for each calendar year averaging period

that includes the following information,

and in the case of a refiner or importer

producing or importing both GPA

gasoline and other gasoline, the

information shall be separately reported:

(1) The EPA importer, or refiner and

refinery facility registration numbers;

(2) The applicable baseline, average

standard, and adjusted cap standard as

follows:

(i) For the years 2000 through 2003,

the applicable baseline under § 80.250

or § 80.295.

(ii) For the 2004 averaging period and

subsequent averaging periods:

Federal Register / Vol. 65, No. 28 / Thursday, February 10, 2000 / Rules and Regulations 6837

(A) All applicable average standards

under § 80.195, § 80.216, § 80.240 or

§ 80.270;

(B) All applicable adjusted cap

standards under § 80.195(d), with the

2005 report identifying both the 2004

and 2005 applicable adjusted cap

standards;

(3) The total volume of gasoline

produced or imported;

(4) The annual average sulfur content

of the gasoline produced or imported;

(5) The annual average sulfur level

after inclusion of any credits and

allotments;

(6) Information, separately provided,

for credits and allotments, and

separately by year of creation, as

follows:

(i) The number of credits and

allotments at the beginning of the

averaging period;

(ii) The number of credits and

allotments generated;

(iii) The number of credits and

allotments used;

(iv) If any credits or allotments were

obtained from or transferred to other

parties, for each other party its name

and EPA refiner or importer registration

number, and the number of credits or

allotments obtained from or transferred

to the other party;

(v) The number of credits and

allotments that expired at the end of the

averaging period;

(vi) The number of credits and

allotments that will carry over into the

subsequent averaging period; and

(vii) The number of each type of

allotments converted to credits;

(7) For each batch of gasoline

produced or imported during the

averaging period:

(i) The batch number assigned under

§ 80.65(d)(3) and the appropriate

designation under § 80.365; except that

if composite samples of conventional

gasoline representing multiple batches

produced subsequent to December 31,

2003, are tested under § 80.101(i)(2) for

anti-dumping compliance purposes, for

purposes of this subpart a separate batch

number must be assigned to each batch

using the batch numbering procedures

under § 80.65(d)(3);

(ii) The date the batch was produced;

(iii) The volume of the batch; and

(iv) The sulfur content of the batch as

determined under § 80.330; and

(8) When submitting reports under

this paragraph (a), any importer shall

exclude certified Sulfur-FRGAS.

(b) Additional reporting requirements

for importers. Any importer shall report

the following information for SulfurFRGAS imported during the averaging

period:

(1) The EPA refiner and refinery

registration numbers of each foreign

refiner and refinery where the certified

Sulfur-FRGAS was produced; and

(2) The total gallons of certified

Sulfur-FRGAS and non-certified SulfurFRGAS imported from each foreign

refiner and refinery.

(c) Corporate pool average reports. (1)

Annual reports filed under this section

for the 2004 and 2005 averaging periods

must include the party’s corporate pool

average as determined under § 80.205.

(2) If the party submitting the annual

report under paragraph (c)(1) of this

section is a refiner with more than one

refinery or is a refiner who also imports

gasoline, then for the purposes of this

paragraph, the party shall report the

information required for individual

refineries and for importers under

paragraph (a) of this section, also in the

aggregate for all the gasoline produced

and imported during the calendar year.

(3) Refiners and importers exempted

from corporate pool standards under

§ 80.216 or § 80.240 are exempt from

reporting the information required

under paragraphs (c)(1) and (c)(2) of this

section.

(d) Report submission. Any annual

report required under this section shall

be:

(1) Signed and certified as meeting all

of the applicable requirements of this

subpart by the owner or a responsible

corporate officer of the refiner or

importer; and

(2) Submitted to EPA no later than the

last day of February for the prior

calendar year averaging period.

(f) Attest reports. Attest reports for

refiner and importer attest engagements

required under § 80.415 shall be

submitted to the Administrator by May

31 of each year for the prior calendar

year averaging period.

§§ 80.371—80.373 [Reserved]

Exemptions

§ 80.374 What if a refiner or importer is

unable to produce gasoline conforming to

the requirements of this subpart?

In appropriate extreme and unusual

circumstances (e.g., natural disaster or

Act of God) which are clearly outside

the control of the refiner or importer

and which could not have been avoided

by the exercise of prudence, diligence,

and due care, EPA may permit a refiner

or importer, for a brief period, to

distribute gasoline which does not meet

the requirements of this subpart

provided the refiner or importer meets

all the criteria, requirements and

conditions contained in § 80.73 (a)

through (e).

§ 80.375 What requirements apply to

California gasoline?

(a) Definition. For purposes of this

subpart California gasoline means any

gasoline designated by the refiner as for

use in California.

(b) California gasoline exemption.

California gasoline that complies with

all the requirements of this section is

exempt from all other provisions of this

subpart.

(c) Requirements for California

gasoline. The requirements are:

(1) Each batch of California gasoline

must be designated as such by its refiner

or importer;

(2) Designated California gasoline

must be kept segregated from gasoline

that is not California gasoline, at all

points in the distribution system;

(3) Designated California gasoline

must ultimately be used in the State of

California and not used elsewhere;

(4) In the case of California gasoline

produced outside the State of California,

the transferors and transferees must

meet the product transfer document

requirements under § 80.81(g); and

(5) Gasoline that is ultimately used in

any part of the United States outside of

the State of California must comply with

the standards and requirements of this

subpart, regardless of any designation as

California gasoline.

(d) Use of California test methods and

off site sampling procedures. In the case

of any gasoline that is not California

gasoline and that is either produced at

a refinery located in the State of

California or is imported from outside

the United States into the State of

California, the refiner or importer may,

with regard to such gasoline:

(1) Use the sampling and testing

methods approved in Title 13 of the

California Code of Regulations instead

of the sampling and testing methods

required under § 80.330; and

(2) Determine the sulfur content of

gasoline at off site tankage as permitted

in § 80.81(h)(2).

§ 80.380 What are the requirements for

obtaining an exemption for gasoline used

for research, development or testing

purposes?

Any person may request an

exemption from the provisions of this

subpart for gasoline used for research,

development or testing (‘‘R&D’’)

purposes by submitting to EPA an

application that includes all the

information listed in paragraph (b) of

this section.

(a) Criteria for an R&D exemption. For

an R&D exemption to be granted, the

proposed test program must:

(1) Have a purpose that constitutes an

appropriate basis for exemption;

6838 Federal Register / Vol. 65, No. 28 / Thursday, February 10, 2000 / Rules and Regulations

(2) Necessitate the granting of an

exemption;

(3) Be reasonable in scope; and

(4) Have a degree of control consistent

with the purpose of the program and

EPA’s monitoring requirements.

(b) Information required to be

submitted. To demonstrate each of the

four elements in paragraphs (a)(1)

through (4) of this section, the

application required under this section

must include the following information:

(1) A statement of the purpose of the

program demonstrating that the program

has an appropriate R&D purpose.

(2) An explanation of why the stated

purpose of the program cannot be

achieved in a practicable manner

without performing one or more of the

prohibited acts under § 80.385.

(3) To demonstrate the reasonableness

of the scope of the program:

(i) An estimate of the program’s

beginning and ending dates;

(ii) An estimate of the maximum

number of vehicles and engines

involved in the program, and the

number of miles and engine hours that

will be accumulated on each;

(iii) The sulfur content of the gasoline

expected to be used in the program; and

(iv) The quantity of gasoline that

exceeds the applicable sulfur standard

that is expected to be used in the

program.

(4) With regard to control, a

demonstration that the program affords

EPA a monitoring capability, including

at a minimum:

(i) A description of the technical and

operational aspects of the program;

(ii) The site(s) of the program

(including street address, city, county,

State, and ZIP code);

(iii) The manner in which information

on vehicles and engines used in the

program will be recorded and made

available to EPA;

(iv) The manner in which results of

the program will be recorded and made

available to EPA;

(v) The manner in which information

on the gasoline used in the program

(including quantity, sulfur content,

name, address, telephone number and

contact person of the supplier, and the

date received from the supplier), will be

recorded and made available to EPA;

(vi) The manner in which distribution

pumps will be labeled to insure proper

use of the gasoline where appropriate;

(vii) The name, address, telephone

number and title of the person(s) in the

organization requesting an exemption

from whom further information on the

application may be obtained; and

(viii) The name, address, telephone

number and title of the person(s) in the

organization requesting an exemption

who is responsible for recording and

making available the information

specified in paragraphs (b)(4)(iii), (iv)

and (v) of this section, and the location

in which such information will be

maintained.

(c) Additional requirements. (1) The

product transfer documents associated

with R&D gasoline must identify the

gasoline as such, and must state that the

gasoline is to be used only for research,

development, or testing purposes.

(2) The R&D gasoline must be

designated by the refiner or importer as

exempt R&D gasoline.

(3) The R&D gasoline must be kept

segregated from non-exempt gasoline at

all points in the distribution system of

the gasoline.

(4) The R&D gasoline must not be

sold, distributed, offered for sale or

distribution, dispensed, supplied,

offered for supply, transported to or

from, or stored by a gasoline retail

outlet, or by a wholesale purchaserconsumer facility, unless the wholesale

purchaser-consumer facility is

associated with the R&D program that

uses the gasoline.

(d) Memorandum of exemption. The

Administrator will grant an R&D

exemption upon a demonstration that

the requirements of this section have

been met. The R&D exemption will be

granted in the form of a memorandum

of exemption signed by the applicant

and the Administrator (or delegate),

which may include such terms and

conditions as the Administrator

determines necessary to monitor the

exemption and to carry out the purposes

of this section, including restoration of

motor vehicle emissions control

systems. Any violation of such a term or

condition of the exemption or any

requirement under this section will

cause the exemption to be void ab initio.

(e) Effects of exemption. Gasoline that

is subject to an R&D exemption under

this section is exempt from other

provisions of this subpart provided that

the gasoline is used in a manner that

complies with the memorandum of

exemption granted under paragraph (d)

of this section.

Violation Provisions

§ 80.385 What acts are prohibited under

the gasoline sulfur program?

No person shall:

(a) Averaging violation. Produce or

import gasoline that does not comply

with the applicable sulfur average

standard under § 80.195, § 80.216 or

§ 80.240.

(b) Cap standard violation. Produce,

import, sell, offer for sale, dispense,

supply, offer for supply, store or

transport gasoline that does not comply

with the applicable sulfur cap standard

under § 80.195, § 80.216, § 80.210,

§ 80.220 or § 80.240.

(c) Causing an averaging, cap

standard, or geographic phase-in area

(GPA) use violation. Cause another

person to commit an act in violation of

paragraph (a), (b), or (f) of this section.

(d) Causing violating gasoline to be in

the distribution system. Cause gasoline

to be in the distribution system which

does not comply with an applicable

sulfur cap standard under § 80.195,

§ 80.210, § 80.216, § 80.220 or § 80.240;

a sulfur average standard under

§ 80.195, § 80.216 or § 80.240; or a GPA

use prohibition under § 80.219(c).

(e) Denatured ethanol violation. Blend

into gasoline denatured ethanol with a

sulfur content higher than 30 ppm.

(f) GPA use violation. Produce,

import, sell, offer for sale, dispense,

supply, offer for supply, store or

transport gasoline that does not comply

with a GPA use prohibition under

§ 80.219(c).

§ 80.390 What evidence may be used to

determine compliance with the prohibitions

and requirements of this subpart and

liability for violations of this subpart?

(a) Compliance with the sulfur

standards of this subpart shall be

determined based on the sulfur level of

the gasoline, measured using the

methodologies specified in §§ 80.330(b)

and 80.46(a). Any evidence or

information, including the exclusive use

of such evidence or information, may be

used to establish the sulfur level of

gasoline if the evidence or information

is relevant to whether the sulfur level of

gasoline would have been in

compliance with the standards if the

appropriate sampling and testing

methodology had been correctly

performed. Such evidence may be

obtained from any source or location

and may include, but is not limited to,

test results using methods other than

those specified in §§ 80.330(b) and

80.46(a), business records, and

commercial documents.

(b) Determinations of compliance

with the requirements of this subpart

other than the sulfur standards, and

determinations of liability for any

violation of this subpart, may be based

on information obtained from any

source or location. Such information

may include, but is not limited to,

business records and commercial

documents.

§ 80.395 Who is liable for violations under

the gasoline sulfur program?

(a) Persons liable for violations of

prohibited acts. (1) Averaging violation.

Federal Register / Vol. 65, No. 28 / Thursday, February 10, 2000 / Rules and Regulations 6839

Any refiner or importer who violates

§ 80.385(a) is liable for the violation.

(2) Causing an averaging violation.

Any refiner, importer, distributor,

reseller, carrier, retailer, wholesale

purchaser-consumer, or oxygenate

blender who causes another party to

violate § 80.385(a), is liable for a

violation of § 80.385(c).

(3) Cap standard violation. Any

refiner, importer, distributor, reseller,

carrier, retailer, wholesale purchaserconsumer, or oxygenate blender who

owned, leased, operated, controlled or

supervised a facility where a violation

of § 80.385 (b) occurred, is deemed in

violation of § 80.385(b).

(4) Causing a cap standard violation.

Any refiner, importer, distributor,

reseller, carrier, retailer, wholesale

purchaser-consumer, or oxygenate

blender who produced, imported, sold,

offered for sale, dispensed, supplied,

offered for supply, stored, transported,

or caused the transportation or storage

of gasoline that violates § 80.385(b), is

deemed in violation of § 80.385(c).

(5) GPA use violation. Any refiner,

importer, distributor, reseller, carrier,

retailer, wholesale purchaser-consumer,

or oxygenate blender who produced,

imported, sold, offered for sale,

dispensed, supplied, offer for supply,

stored, transported, or caused the

transportation or storage of gasoline that

violates § 80.385(f), is deemed in

violation of § 80.385(f).

(6) Causing a GPA use violation. Any

refiner, importer, distributor, reseller,

carrier, retailer, wholesale purchaserconsumer, or oxygenate blender who

causes another party to violate

§ 80.385(f), is deemed liable for a

violation of § 80.385(c).

(7) Branded refiner/importer liability.

Any refiner or importer whose

corporate, trade, or brand name, or

whose marketing subsidiary’s corporate,

trade, or brand name appeared at a

facility where a violation of § 80.385(b)

or (f) occurred, is deemed in violation

of § 80.385(b) or (f), as applicable.

(8) Causing violating gasoline to be in

the distribution system. Any refiner,

importer, distributor, reseller, carrier, or

oxygenate blender, who owned, leased,

operated, controlled or supervised a

facility from which gasoline was

released into the distribution system

which does not comply with an

applicable sulfur cap standard, a sulfur

averaging standard, or a GPA use

prohibition, is deemed in violation of

§ 80.385(d).

(9) Carrier causation. In order for a

carrier to be liable under paragraph

(a)(2), (4), (6), or (8) of this section, EPA

must demonstrate, by reasonably

specific showing by direct or

circumstantial evidence, that the carrier

caused the violation.

(10) Denatured ethanol violation. Any

oxygenate blender who violates

§ 80.385(e) is liable for the violation.

(11) Parent corporation liability. Any

parent corporation is liable for any

violations of this subpart that are

committed by any of its wholly-owned

subsidiaries.

(12) Joint venture liability. Each

partner to a joint venture is jointly and

severally liable for any violation of this

subpart that occurs at the joint venture

facility or is committed by the joint

venture operation.

(b) Persons liable for failure to meet

other provisions of this subpart. (1) Any

refiner, importer, distributor, reseller,

carrier, wholesale purchaser-consumer,

retailer, or oxygenate blender who fails

to meet a provision of this subpart not

addressed in paragraph (a) of this

section is liable for a violation of that

provision.

(2) Any refiner, importer, distributor,

reseller, carrier, wholesale purchaserconsumer, retailer, or oxygenate blender

who caused another person to fail to

meet a requirement of this subpart not

addressed in paragraph (a) of this

section, is liable for causing a violation

of that provision.

§ 80.400 What defenses apply to persons

deemed liable for a violation of a prohibited

act?

(a) Any person deemed liable for a

violation of a prohibition under § 80.395

(a)(3) through (8), will not be deemed in

violation if the person demonstrates

that:

(1) The violation was not caused by

the person or the person’s employee or

agent; and

(2) The person conducted a quality

assurance sampling and testing

program, as described in paragraph (d)

of this section. A carrier may rely on the

quality assurance program carried out

by another party, including the party

who owns the gasoline in question,

provided that the quality assurance

program is carried out properly.

Retailers and wholesale purchaserconsumers are not required to conduct

quality assurance programs.

(b) In the case of a violation found at

a facility operating under the corporate,

trade or brand name of a refiner or

importer, or a refiner’s or importer’s

marketing subsidiary, the refiner or

importer must show, in addition to the

defense elements required under

paragraphs (a)(1) and (2) of this section,

that the violation was caused by:

(1) An act in violation of law (other

than the Clean Air Act or this part 80),

or an act of sabotage or vandalism;

(2) The action of any refiner, importer,

retailer, distributor, reseller, oxygenate

blender, carrier, retailer or wholesale

purchaser-consumer in violation of a

contractual agreement between the

branded refiner or importer and the

person designed to prevent such action,

and despite periodic sampling and

testing by the branded refiner or

importer to ensure compliance with

such contractual obligation; or

(3) The action of any carrier or other

distributor not subject to a contract with

the refiner or importer, but engaged for

transportation of gasoline, despite

specifications or inspections of

procedures and equipment which are

reasonably calculated to prevent such

action.

(c) Under paragraph (a) of this section

for any person to show that a violation

was not caused by that person, or under

paragraph (b) of this section to show

that a violation was caused by any of the

specified actions, the person must

demonstrate by reasonably specific

showing, by direct or circumstantial

evidence, that the violation was caused

or must have been caused by another

person and that the person asserting the

defense did not contribute to that other

person’s causation.

(d) Quality assurance and testing

program. To demonstrate an acceptable

quality assurance and testing program

under paragraph (a)(2) of this section, a

person must present evidence of the

following:

(1) A periodic sampling and testing

program to ensure the gasoline the

person sold, dispensed, supplied,

stored, or transported, meets the

applicable sulfur standard; and

(2) On each occasion when gasoline is

found not in compliance with the

applicable sulfur standard:

(i) The person immediately ceases

selling, offering for sale, dispensing,

supplying, offering for supply, storing or

transporting the non-complying

product; and

(ii) The person promptly remedies the

violation and the factors that caused the

violation (for example, by removing the

non-complying product from the

distribution system until the applicable

standard is achieved and taking steps to

prevent future violations of a similar

nature from occurring).

(3) For any carrier who transports

gasoline in a tank truck, the quality

assurance program required under this

paragraph (d) need not include periodic

sampling and testing of gasoline in the

tank truck, but in lieu of such tank truck

sampling and testing, the carrier shall

demonstrate evidence of an oversight

program for monitoring compliance

with the requirements of this subpart

6840 Federal Register / Vol. 65, No. 28 / Thursday, February 10, 2000 / Rules and Regulations

relating to the transport or storage of

gasoline by tank truck, such as

appropriate guidance to drivers

regarding compliance with the

applicable sulfur standard and product

transfer document requirements, and

the periodic review of records received

in the ordinary course of business

concerning gasoline quality and

delivery.

§ 80.405 What penalties apply under this

subpart?

(a) Any person liable for a violation

under § 80.395 is subject to civil

penalties as specified in section 205 of

the Clean Air Act for every day of each

such violation and the amount of

economic benefit or savings resulting

from each violation.

(b) Any person liable under

§ 80.395(a)(1) or (2) for a violation of the

applicable sulfur averaging standard or

causing another party to violate that

standard during any averaging period, is

subject to a separate day of violation for

each and every day in the averaging

period. Any person liable under

§ 80.395(b) for a failure to fulfill any

requirement for credit or allotment

generation, transfer, use, banking, or

deficit correction, is subject to a

separate day of violation for each and

every day in the averaging period in

which invalid credits or allotments are

generated or used.

(c)(1) Any person liable under

§ 80.395(a)(3), (4), (5), or (6) for a

violation of an applicable sulfur per

gallon cap standard under § 80.195,

§ 80.210, § 80.216, § 80.220 or § 80.240,

a GPA use prohibition under

§ 80.219(c), or of causing another party

to violate a cap standard or a GPA use

prohibition, is subject to a separate day

of violation for each and every day the

non-complying gasoline remains any

place in the gasoline distribution

system.

(2) Any person liable under

§ 80.395(a)(8) for causing gasoline to be

in the distribution system which does

not comply with an applicable sulfur

cap standard, a sulfur averaging

standard, or a GPA use prohibition, is

subject to a separate day of violation for

each and every day that the noncomplying gasoline remains any place

in the gasoline distribution system.

(3) For purposes of paragraph (c) of

this section, the length of time the

gasoline in question remained in the

gasoline distribution system is deemed

to be twenty-five days, unless a person

subject to liability or EPA demonstrates

by reasonably specific showings, by

direct or circumstantial evidence, that

the non-complying gasoline remained in

the gasoline distribution system for

fewer than or more than twenty-five

days.

(d) Any person liable under

§ 80.395(b) for failure to meet, or

causing a failure to meet, a provision of

this subpart is liable for a separate day

of violation for each and every day such

provision remains unfulfilled.

Provisions for Foreign Refiners With

Individual Sulfur Baselines

§ 80.410 What are the additional

requirements for gasoline produced at

foreign refineries having individual small

refiner sulfur baselines, foreign refineries

granted temporary relief under § 80.270, or

baselines for generating credits during 2000

through 2003?

(a) Definitions. (1) A foreign refinery

is a refinery that is located outside the

United States, the Commonwealth of

Puerto Rico, the Virgin Islands, Guam,

American Samoa, and the

Commonwealth of the Northern Mariana

Islands (collectively referred to in this

section as ‘‘the United States’’).

(2) A foreign refiner is a person who

meets the definition of refiner under

§ 80.2(i) for a foreign refinery.

(3) A small foreign refiner is a refiner

that meets the definition of a small

refiner under § 80.225.

(4) ‘‘Sulfur-FRGAS’’ means gasoline

produced at a foreign refinery that has

been assigned an individual refinery

sulfur baseline under §§ 80.250 or

80.295, or has been granted temporary

relief under § 80.270, and that is

imported into the United States.

(5) ‘‘Non-Sulfur-FRGAS’’ means

gasoline that is produced at a foreign

refinery that has not been assigned an

individual refinery sulfur baseline,

gasoline produced at a foreign refinery

with an individual refinery sulfur

baseline that is not imported into the

United States, and gasoline produced at

a foreign refinery with an individual

sulfur baseline during a year when the

foreign refiner has opted to not

participate in the Sulfur-FRGAS

program under paragraph (c)(3) of this

section.

(6) ‘‘Certified Sulfur-FRGAS’’ means

Sulfur-FRGAS the foreign refiner

intends to include in the foreign

refinery’s sulfur compliance

calculations under § 80.205 pursuant to

§ 80.240 or § 80.270 or credit

calculations under §§ 80.305 or 80.310

and allotment calculations under

§ 80.275(a), and does include in these

compliance calculations when reported

to EPA.

(7) ‘‘Non-Certified Sulfur-FRGAS’’

means Sulfur-FRGAS that is not

Certified Sulfur-FRGAS.

(b) Baseline establishment. Any

foreign refiner who does not have an

approved refinery baseline under

§ 80.94 may submit a petition to the

Administrator for an individual refinery

sulfur baseline pursuant to §§ 80.245

and 80.250, a baseline for generating

credits or allotments under §§ 80.290

and 80.295, or a baseline for temporary

refinery relief under §§ 80.270 and

80.295.

(1) The refiner shall follow the

procedures specified in §§ 80.91

through 80.93 to establish the volume

and sulfur content of gasoline that was

produced at the foreign refinery and

imported into the United States during

1997 and 1998 for purposes of

establishing baselines under § 80.250 or

§ 80.295.

(2) In making determinations for

foreign refinery baselines EPA will

consider all information supplied by a

foreign refiner, and in addition may rely

on any and all appropriate assumptions

necessary to make such determinations.

(3) Where a foreign refiner submits a

petition that is incomplete or

inadequate to establish an accurate

baseline, and the refiner fails to cure

this defect after a request for more

information, EPA will not assign an

individual refinery sulfur baseline.

(c) General requirements for foreign

refiners with individual refinery sulfur

baselines. A foreign refiner of a refinery

that has been assigned an individual

sulfur baseline under § 80.250 or

§ 80.295 must designate all gasoline

produced at the foreign refinery that is

exported to the United States as either

Certified Sulfur-FRGAS or as NonCertified Sulfur-FRGAS, except as

provided in paragraph (c)(3) of this

section.

(1) In the case of Certified SulfurFRGAS, the foreign refiner must meet

all provisions that apply to refiners

under this subpart H.

(2) In the case of Non-Certified SulfurFRGAS, the foreign refiner shall meet all

the following provisions, except the

foreign refiner shall substitute the name

Non-Certified Sulfur-FRGAS for the

names ‘‘reformulated gasoline’’ or

‘‘RBOB’’ wherever they appear in the

following provisions:

(i) The designation requirements in

this section;

(ii) The recordkeeping requirements

under § 80.365;

(iii) The reporting requirements in

§ 80.370 and this section;

(iv) The product transfer document

requirements in this section;

(v) The prohibitions in this section

and § 80.385; and

(vi) The independent audit

requirements under § 80.415, paragraph

(h) of this section, §§ 80.125 through

Federal Register / Vol. 65, No. 28 / Thursday, February 10, 2000 / Rules and Regulations 6841

80.127, § 80.128(a),(b),(c),(g) through (i),

and § 80.130.

(3)(i) Any foreign refiner that

generates sulfur credits under § 80.305

during the period 2000 through 2003, or

allotments under § 80.275(a) during

2003, and any small refiner generating

credits under § 80.310, shall designate

all Sulfur-FRGAS as Certified SulfurFRGAS for any year that such credits are

generated.

(ii) Any foreign refiner that has been

assigned an individual sulfur baseline

for a foreign refinery under § 80.250 or

§ 80.295 may elect to classify no

gasoline imported into the United States

as Sulfur-FRGAS, provided the foreign

refiner notifies EPA of the election no

later than November 1 of the prior

calendar year.

(iii) An election under paragraph

(c)(3)(ii) of this section shall:

(A) Apply to an entire calendar year

averaging period, and apply to all

gasoline produced during the calendar

year at the foreign refinery that is used

in the United States; and

(B) Remain in effect for each

succeeding calendar year averaging

period, unless and until the foreign

refiner notifies EPA of a termination of

the election. The change in election

shall take effect at the beginning of the

next calendar year.

(d) Designation, product transfer

documents, and foreign refiner

certification. (1) Any foreign refiner of a

foreign refinery that has been assigned

an individual sulfur baseline must

designate each batch of Sulfur-FRGAS

as such at the time the gasoline is

produced, unless the refiner has elected

to classify no gasoline exported to the

United States as Sulfur-FRGAS under

paragraph (c)(3)(i) of this section.

(2) On each occasion when any

person transfers custody or title to any

Sulfur-FRGAS prior to its being

imported into the United States, it must

include the following information as

part of the product transfer document

information in this section:

(i) Identification of the gasoline as

Certified Sulfur-FRGAS or as NonCertified Sulfur-FRGAS; and

(ii) The name and EPA refinery

registration number of the refinery

where the Sulfur-FRGAS was produced.

(3) On each occasion when SulfurFRGAS is loaded onto a vessel or other

transportation mode for transport to the

United States, the foreign refiner shall

prepare a certification for each batch of

the Sulfur-FRGAS that meets the

following requirements:

(i) The certification shall include the

report of the independent third party

under paragraph (f) of this section, and

the following additional information:

(A) The name and EPA registration

number of the refinery that produced

the Sulfur-FRGAS;

(B) The identification of the gasoline

as Certified Sulfur-FRGAS or NonCertified Sulfur-FRGAS;

(C) The volume of Sulfur-FRGAS

being transported, in gallons;

(D) In the case of Certified SulfurFRGAS:

(1) The sulfur content as determined

under paragraph (f) of this section; and

(2) A declaration that the SulfurFRGAS is being included in the

compliance calculations under § 80.205

or credit calculations under § 80.305 or

allotments under § 80.275(a) for the

refinery that produced the SulfurFRGAS.

(ii) The certification shall be made

part of the product transfer documents

for the Sulfur-FRGAS.

(e) Transfers of Sulfur-FRGAS to nonUnited States markets. The foreign

refiner is responsible to ensure that all

gasoline classified as Sulfur-FRGAS is

imported into the United States. A

foreign refiner may remove the SulfurFRGAS classification, and the gasoline

need not be imported into the United

States, but only if:

(1)(i) The foreign refiner excludes:

(A) The volume of gasoline from the

refinery’s compliance calculations

under § 80.205; and

(B) In the case of Certified SulfurFRGAS, the volume and sulfur content

of the gasoline from the compliance

calculations under § 80.205 or credit

calculations under § 80.305.

(ii) The exclusions under paragraph

(e)(1)(i) of this section shall be on the

basis of the sulfur content and volumes

determined under paragraph (f) of this

section; and

(2) The foreign refiner obtains

sufficient evidence in the form of

documentation that the gasoline was not

imported into the United States.

(f) Load port independent sampling,

testing and refinery identification. (1)

On each occasion Sulfur-FRGAS is

loaded onto a vessel for transport to the

United States a foreign refiner shall

have an independent third party:

(i) Inspect the vessel prior to loading

and determine the volume of any tank

bottoms;

(ii) Determine the volume of SulfurFRGAS loaded onto the vessel

(exclusive of any tank bottoms present

before vessel loading);

(iii) Obtain the EPA-assigned

registration number of the foreign

refinery;

(iv) Determine the name and country

of registration of the vessel used to

transport the Sulfur-FRGAS to the

United States; and

(v) Determine the date and time the

vessel departs the port serving the

foreign refinery.

(2) On each occasion Certified SulfurFRGAS is loaded onto a vessel for

transport to the United States a foreign

refiner shall have an independent third

party:

(i) Collect a representative sample of

the Certified Sulfur-FRGAS from each

vessel compartment subsequent to

loading on the vessel and prior to

departure of the vessel from the port

serving the foreign refinery;

(ii) Prepare a volume-weighted vessel

composite sample from the

compartment samples, and determine

the value for sulfur using the

methodology specified in § 80.330 by:

(A) The third party analyzing the

sample; or

(B) The third party observing the

foreign refiner analyze the sample;

(iii) Review original documents that

reflect movement and storage of the

certified Sulfur-FRGAS from the

refinery to the load port, and from this

review determine:

(A) The refinery at which the SulfurFRGAS was produced; and

(B) That the Sulfur-FRGAS remained

segregated from:

(1) Non-Sulfur-FRGAS and NonCertified Sulfur-FRGAS; and

(2) Other Certified Sulfur-FRGAS

produced at a different refinery.

(3) The independent third party shall

submit a report:

(i) To the foreign refiner containing

the information required under

paragraphs (f)(1) and (2) of this section,

to accompany the product transfer

documents for the vessel; and

(ii) To the Administrator containing

the information required under

paragraphs (f)(1) and (2) of this section,

within thirty days following the date of

the independent third party’s

inspection. This report shall include a

description of the method used to

determine the identity of the refinery at

which the gasoline was produced,

assurance that the gasoline remained

segregated as specified in paragraph

(n)(1) of this section, and a description

of the gasoline’s movement and storage

between production at the source

refinery and vessel loading.

(4) The independent third party must:

(i) Be approved in advance by EPA,

based on a demonstration of ability to

perform the procedures required in this

paragraph (f);

(ii) Be independent under the criteria

specified in § 80.65(e)(2)(iii); and

(iii) Sign a commitment that contains

the provisions specified in paragraph (i)

of this section with regard to activities,

facilities and documents relevant to

6842 Federal Register / Vol. 65, No. 28 / Thursday, February 10, 2000 / Rules and Regulations

compliance with the requirements of

this paragraph (f).

(g) Comparison of load port and port

of entry testing. (1)(i) Except as

described in paragraph (g)(1)(ii) of this

section, any foreign refiner and any

United States importer of Certified

Sulfur-FRGAS shall compare the results

from the load port testing under

paragraph (f) of this section, with the

port of entry testing as reported under

paragraph (o) of this section, for the

volume of gasoline and the sulfur value.

(ii) Where a vessel transporting

Certified Sulfur-FRGAS off loads this

gasoline at more than one United States

port of entry, and the conditions of

paragraph (g)(2)(i) of this section are met

at the first United States port of entry,

the requirements of paragraph (g)(2) of

this section do not apply at subsequent

ports of entry if the United States

importer obtains a certification from the

vessel owner, that meets the

requirements of paragraph (s) of this

section, that the vessel has not loaded

any gasoline or blendstock between the

first United States port of entry and the

subsequent port of entry.

(2)(i) The requirements of this

paragraph (g)(2) apply if:

(A) The temperature-corrected

volumes determined at the port of entry

and at the load port differ by more than

one percent; or

(B) The sulfur value determined at the

port of entry is higher than the sulfur

value determined at the load port, and

the amount of this difference is greater

than the reproducibility amount

specified for the port of entry test result

by the American Society of Testing and

Materials (ASTM).

(ii) The United States importer and

the foreign refiner shall treat the

gasoline as Non-Certified SulfurFRGAS, and the foreign refiner shall

exclude the gasoline volume and

properties from its gasoline sulfur

compliance calculations under § 80.205.

(h) Attest requirements. The following

additional procedures shall be carried

out by any foreign refiner of SulfurFRGAS as part of the applicable attest

engagement for each foreign refinery

under § 80.415:

(1) The inventory reconciliation

analysis under § 80.128(b) and the

tender analysis under § 80.128(c) shall

include Non-Sulfur-FRGAS in addition

to the gasoline types listed in

§ 80.128(b) and (c).

(2) Obtain separate listings of all

tenders of Certified Sulfur-FRGAS, and

of Non-Certified Sulfur-FRGAS. Agree

the total volume of tenders from the

listings to the gasoline inventory

reconciliation analysis in § 80.128(b),

and to the volumes determined by the

third party under paragraph (f)(1) of this

section.

(3) For each tender under paragraph

(h)(2) of this section where the gasoline

is loaded onto a marine vessel, report as

a finding the name and country of

registration of each vessel, and the

volumes of Sulfur-FRGAS loaded onto

each vessel.

(4) Select a sample from the list of

vessels identified in paragraph (h)(3) of

this section used to transport Certified

Sulfur-FRGAS, in accordance with the

guidelines in § 80.127, and for each

vessel selected perform the following:

(i) Obtain the report of the

independent third party, under

paragraph (f) of this section, and of the

United States importer under paragraph

(o) of this section.

(A) Agree the information in these

reports with regard to vessel

identification, gasoline volumes and test

results.

(B) Identify, and report as a finding,

each occasion the load port and port of

entry parameter and volume results

differ by more than the amounts

allowed in paragraph (g) of this section,

and determine whether the foreign

refiner adjusted its refinery calculations

as required in paragraph (g) of this

section.

(ii) Obtain the documents used by the

independent third party to determine

transportation and storage of the

Certified Sulfur-FRGAS from the

refinery to the load port, under

paragraph (f) of this section. Obtain tank

activity records for any storage tank

where the Certified Sulfur-FRGAS is

stored, and pipeline activity records for

any pipeline used to transport the

Certified Sulfur-FRGAS, prior to being

loaded onto the vessel. Use these

records to determine whether the

Certified Sulfur-FRGAS was produced

at the refinery that is the subject of the

attest engagement, and whether the

Certified Sulfur-FRGAS was mixed with

any Non-Certified Sulfur-FRGAS, NonSulfur-FRGAS, or any Certified SulfurFRGAS produced at a different refinery.

(5)(i) Select a sample from the list of

vessels identified in paragraph (h)(3) of

this section used to transport certified

and Non-Certified Sulfur-FRGAS, in

accordance with the guidelines in

§ 80.127, and for each vessel selected

perform the following:

(ii) Obtain a commercial document of

general circulation that lists vessel

arrivals and departures, and that

includes the port and date of departure

of the vessel, and the port of entry and

date of arrival of the vessel. Agree the

vessel’s departure and arrival locations

and dates from the independent third

party and United States importer reports

to the information contained in the

commercial document.

(6) Obtain separate listings of all

tenders of Non-Sulfur-FRGAS, and

perform the following:

(i) Agree the total volume of tenders

from the listings to the gasoline

inventory reconciliation analysis in

§ 80.128(b).

(ii) Obtain a separate listing of the

tenders under paragraph (h)(6) of this

section where the gasoline is loaded

onto a marine vessel. Select a sample

from this listing in accordance with the

guidelines in § 80.127, and obtain a

commercial document of general

circulation that lists vessel arrivals and

departures, and that includes the port

and date of departure and the ports and

dates where the gasoline was off loaded

for the selected vessels. Determine and

report as a finding the country where

the gasoline was off loaded for each

vessel selected.

(7) In order to complete the

requirements of this paragraph (h) an

auditor shall:

(i) Be independent of the foreign

refiner;

(ii) Be licensed as a Certified Public

Accountant in the United States and a

citizen of the United States, or be

approved in advance by EPA based on

a demonstration of ability to perform the

procedures required in §§ 80.125

through 80.130 and this paragraph (h);

and

(iii) Sign a commitment that contains

the provisions specified in paragraph (i)

of this section with regard to activities

and documents relevant to compliance

with the requirements of §§ 80.125

through 80.130, § 80.415 and this

paragraph (h).

(i) Foreign refiner commitments. Any

foreign refiner shall commit to and

comply with the provisions contained

in this paragraph (i) as a condition to

being assigned an individual refinery

sulfur baseline.

(1) Any United States Environmental

Protection Agency inspector or auditor

will be given full, complete and

immediate access to conduct

inspections and audits of the foreign

refinery.

(i) Inspections and audits may be

either announced in advance by EPA, or

unannounced.

(ii) Access will be provided to any

location where:

(A) Gasoline is produced;

(B) Documents related to refinery

operations are kept;

(C) Gasoline or blendstock samples

are tested or stored; and

(D) Sulfur-FRGAS is stored or

transported between the foreign refinery

Federal Register / Vol. 65, No. 28 / Thursday, February 10, 2000 / Rules and Regulations 6843

and the United States, including storage

tanks, vessels and pipelines.

(iii) Inspections and audits may be by

EPA employees or contractors to EPA.

(iv) Any documents requested that are

related to matters covered by

inspections and audits will be provided

to an EPA inspector or auditor on

request.

(v) Inspections and audits by EPA

may include review and copying of any

documents related to:

(A) Refinery baseline establishment,

including the volume and sulfur

content, and transfers of title or custody,

of any gasoline or blendstocks, whether

Sulfur-FRGAS or Non-Sulfur-FRGAS,

produced at the foreign refinery during

the period January 1, 1997 through the

date of the refinery baseline petition or

through the date of the inspection or

audit if a baseline petition has not been

approved, and any work papers related

to refinery baseline establishment;

(B) The volume and sulfur content of

Sulfur-FRGAS;

(C) The proper classification of

gasoline as being Sulfur-FRGAS or as

not being Sulfur-FRGAS, or as Certified

Sulfur-FRGAS or as Non-Certified

Sulfur-FRGAS;

(D) Transfers of title or custody to

Sulfur-FRGAS;

(E) Sampling and testing of SulfurFRGAS;

(F) Work performed and reports

prepared by independent third parties

and by independent auditors under the

requirements of this section and

§ 80.415 including work papers; and

(G) Reports prepared for submission

to EPA, and any work papers related to

such reports.

(vi) Inspections and audits by EPA

may include taking samples of gasoline

or blendstock, and interviewing

employees.

(vii) Any employee of the foreign

refiner will be made available for

interview by the EPA inspector or

auditor, on request, within a reasonable

time period.

(viii) English language translations of

any documents will be provided to an

EPA inspector or auditor, on request,

within 10 working days.

(ix) English language interpreters will

be provided to accompany EPA

inspectors and auditors, on request.

(2) An agent for service of process

located in the District of Columbia will

be named, and service on this agent

constitutes service on the foreign refiner

or any employee of the foreign refiner

for any action by EPA or otherwise by

the United States related to the

requirements of this subpart H.

(3) The forum for any civil or criminal

enforcement action related to the

provisions of this section for violations

of the Clean Air Act or regulations

promulgated thereunder shall be

governed by the Clean Air Act,

including the EPA administrative forum

where allowed under the Clean Air Act.

(4) United States substantive and

procedural laws shall apply to any civil

or criminal enforcement action against

the foreign refiner or any employee of

the foreign refiner related to the

provisions of this section.

(5) Submitting a petition for an

individual refinery sulfur baseline,

producing and exporting gasoline under

an individual refinery sulfur baseline,

and all other actions to comply with the

requirements of this subpart H relating

to the establishment and use of an

individual refinery sulfur baseline

constitute actions or activities that

satisfy the provisions of 28 U.S.C.

section 1605(a)(2), but solely with

respect to actions instituted against the

foreign refiner, its agents and employees

in any court or other tribunal in the

United States for conduct that violates

the requirements applicable to the

foreign refiner under this subpart H,

including conduct that violates Title 18

U.S.C. section 1001 and Clean Air Act

section 113(c)(2).

(6) The foreign refiner, or its agents or

employees, will not seek to detain or to

impose civil or criminal remedies

against EPA inspectors or auditors,

whether EPA employees or EPA

contractors, for actions performed

within the scope of EPA employment

related to the provisions of this section.

(7) The commitment required by this

paragraph (i) shall be signed by the

owner or president of the foreign refiner

business.

(8) In any case where Sulfur-FRGAS

produced at a foreign refinery is stored

or transported by another company

between the refinery and the vessel that

transports the Sulfur-FRGAS to the

United States, the foreign refiner shall

obtain from each such other company a

commitment that meets the

requirements specified in paragraphs

(i)(1) through (7) of this section, and

these commitments shall be included in

the foreign refiner’s baseline petition.

(j) Sovereign immunity. By submitting

a petition for an individual foreign

refinery baseline under this section, or

by producing and exporting gasoline to

the United States under an individual

refinery sulfur baseline under this

section, the foreign refiner, its agents

and employees, without exception,

become subject to the full operation of

the administrative and judicial

enforcement powers and provisions of

the United States without limitation

based on sovereign immunity, with

respect to actions instituted against the

foreign refiner, its agents and employees

in any court or other tribunal in the

United States for conduct that violates

the requirements applicable to the

foreign refiner under this subpart H,

including conduct that violates Title 18

U.S.C. section 1001 and Clean Air Act

section 113(c)(2).

(k) Bond posting. Any foreign refiner

shall meet the requirements of this

paragraph (k) as a condition to being

assigned an individual refinery sulfur

baseline.

(l) The foreign refiner shall post a

bond of the amount calculated using the

following equation:

Bond=G×$ 0.01

where:

Bond=amount of the bond in U. S.

dollars.

G=the largest volume of gasoline

produced at the foreign refinery and

exported to the United States, in

gallons, during a single calendar

year among the most recent of the

following calendar years, up to a

maximum of five calendar years:

the calendar year immediately

preceding the date the baseline

petition is submitted, the calendar

year the baseline petition is

submitted, and each succeeding

calendar year.

(2) Bonds shall be posted by:

(i) Paying the amount of the bond to

the Treasurer of the United States;

(ii) Obtaining a bond in the proper

amount from a third party surety agent

that is payable to satisfy United States

administrative or judicial judgments

against the foreign refiner, provided

EPA agrees in advance as to the third

party and the nature of the surety

agreement; or

(iii) An alternative commitment that

results in assets of an appropriate

liquidity and value being readily

available to the United States, provided

EPA agrees in advance as to the

alternative commitment.

(3) If the bond amount for a foreign

refinery increases, the foreign refiner

shall increase the bond to cover the

shortfall within 90 days of the date the

bond amount changes. If the bond

amount decreases, the foreign refiner

may reduce the amount of the bond

beginning 90 days after the date the

bond amount changes.

(4) Bonds posted under this paragraph

(k) shall:

(i) Be used to satisfy any judicial

judgment that results from an

administrative or judicial enforcement

action for conduct in violation of this

subpart H, including where such

conduct violates Title 18 U.S.C. section

6844 Federal Register / Vol. 65, No. 28 / Thursday, February 10, 2000 / Rules and Regulations

1001 and Clean Air Act section

113(c)(2);

(ii) Be provided by a corporate surety

that is listed in the United States

Department of Treasury Circular 570

‘‘Companies Holding Certificates of

Authority as Acceptable Sureties on

Federal Bonds and Acceptable

Reinsuring Companies’’ (Available from

the U.S. Department of the Treasury,

Financial Management Service, Surety

Bond Branch, 3700 East-West Highway,

Room 6A04, Hyattsville, Md. 20782.

Also available on the internet at http:/

/www.fms.treas.gov/c570/c570.html);

and

(iii) Include a commitment that the

bond will remain in effect for at least

five (5) years following the end of latest

averaging period that the foreign refiner

produces gasoline pursuant to the

requirements of this Subpart H.

(5) On any occasion a foreign refiner

bond is used to satisfy any judgment,

the foreign refiner shall increase the

bond to cover the amount used within

90 days of the date the bond is used.

(l) [Reserved]

(m) English language reports. Any

report or other document submitted to

EPA by an foreign refiner shall be in

English language, or shall include an

English language translation.

(n) Prohibitions. (1) No person may

combine Certified Sulfur-FRGAS with

any Non-Certified Sulfur-FRGAS or

Non-Sulfur-FRGAS, and no person may

combine Certified Sulfur-FRGAS with

any Certified Sulfur-FRGAS produced at

a different refinery, until the importer

has met all the requirements of

paragraph (o) of this section, except as

provided in paragraph (e) of this

section.

(2) No foreign refiner or other person

may cause another person to commit an

action prohibited in paragraph (n)(1) of

this section, or that otherwise violates

the requirements of this section.

(o) United States importer

requirements. Any United States

importer shall meet the following

requirements:

(1) Each batch of imported gasoline

shall be classified by the importer as

being Sulfur-FRGAS or as Non-SulfurFRGAS, and each batch classified as

Sulfur-FRGAS shall be further classified

as Certified Sulfur-FRGAS or as Noncertified Sulfur-FRGAS.

(2) Gasoline shall be classified as

Certified Sulfur-FRGAS or as NonCertified Sulfur-FRGAS according to the

designation by the foreign refiner if this

designation is supported by product

transfer documents prepared by the

foreign refiner as required in paragraph

(d) of this section, unless the gasoline is

classified as Non-Certified SulfurFRGAS under paragraph (g) of this

section.

(3) For each gasoline batch classified

as Sulfur-FRGAS, any United States

importer shall perform the following

procedures:

(i) In the case of both Certified and

Non-Certified Sulfur-FRGAS, have an

independent third party:

(A) Determine the volume of gasoline

in the vessel;

(B) Use the foreign refiner’s SulfurFRGAS certification to determine the

name and EPA-assigned registration

number of the foreign refinery that

produced the Sulfur-FRGAS;

(C) Determine the name and country

of registration of the vessel used to

transport the Sulfur-FRGAS to the

United States; and

(D) Determine the date and time the

vessel arrives at the United States port

of entry.

(ii) In the case of Certified SulfurFRGAS, have an independent third

party:

(A) Collect a representative sample

from each vessel compartment

subsequent to the vessel’s arrival at the

United States port of entry and prior to

off loading any gasoline from the vessel;

(B) Prepare a volume-weighted vessel

composite sample from the

compartment samples; and

(C) Determine the sulfur value using

the methodologies specified in § 80.330,

by:

(1) The third party analyzing the

sample; or

(2) The third party observing the

importer analyze the sample.

(4) Any importer shall submit reports

within thirty days following the date

any vessel transporting Sulfur-FRGAS

arrives at the United States port of entry:

(i) To the Administrator containing

the information determined under

paragraph (o)(3) of this section; and

(ii) To the foreign refiner containing

the information determined under

paragraph (o)(3)(ii) of this section.

(5)(i) Any United States importer shall

meet the requirements specified in

§ 80.195 for any imported gasoline that

is not classified as Certified SulfurFRGAS under paragraph (o)(2) of this

section.

(p) Truck imports of Certified SulfurFRGAS produced at a small refinery. (1)

Any refiner whose Certified SulfurFRGAS is transported into the United

States by truck may petition EPA to use

alternative procedures to meet the

following requirements:

(i) Certification under paragraph (d)(5)

of this section;

(ii) Load port and port of entry

sampling and testing under paragraphs

(f) and (g) of this section;

(iii) Attest under paragraph (h) of this

section; and

(iv) Importer testing under paragraph

(o)(3) of this section.

(2) These alternative procedures must

ensure Certified Sulfur-FRGAS remains

segregated from Non-Certified SulfurFRGAS and from Non-Sulfur-FRGAS

until it is imported into the United

States. The petition will be evaluated

based on whether it adequately

addresses the following:

(i) Provisions for monitoring pipeline

shipments, if applicable, from the

refinery, that ensure segregation of

Certified Sulfur-FRGAS from that

refinery from all other gasoline;

(ii) Contracts with any terminals and/

or pipelines that receive and/or

transport Certified Sulfur-FRGAS, that

prohibit the commingling of Certified

Sulfur-FRGAS with any of the

following:

(A) Other Certified Sulfur-FRGAS

from other refineries;

(B) All Non-Certified Sulfur-FRGAS;

or

(C) All Non-Sulfur-FRGAS;

(iii) Procedures for obtaining and

reviewing truck loading records and

United States import documents for

Certified Sulfur-FRGAS to ensure that

such gasoline is only loaded into trucks

making deliveries to the United States;

and

(iv) Attest procedures to be conducted

annually by an independent third party

that review loading records and import

documents based on volume

reconciliation, or other criteria, to

confirm that all Certified Sulfur-FRGAS

remains segregated throughout the

distribution system and is only loaded

into trucks for import into the United

States.

(3) The petition required by this

section must be submitted to EPA along

with the application for small refiner

status and individual refinery sulfur

baseline and standards under § 80.240

and this section.

(q) Withdrawal or suspension of a

foreign refinery’s baseline. EPA may

withdraw or suspend a baseline that has

been assigned to a foreign refinery

where:

(1) A foreign refiner fails to meet any

requirement of this section;

(2) A foreign government fails to

allow EPA inspections as provided in

paragraph (i)(1) of this section;

(3) A foreign refiner asserts a claim of,

or a right to claim, sovereign immunity

in an action to enforce the requirements

in this subpart H; or

(4) A foreign refiner fails to pay a civil

or criminal penalty that is not satisfied

using the foreign refiner bond specified

in paragraph (k) of this section.

Federal Register / Vol. 65, No. 28 / Thursday, February 10, 2000 / Rules and Regulations 6845

(r) Early use of a foreign refinery

baseline. (1) A foreign refiner may begin

using an individual refinery baseline

before EPA has approved the baseline,

provided that:

(i) A baseline petition has been

submitted as required in paragraph (b)

of this section;

(ii) EPA has made a provisional

finding that the baseline petition is

complete;

(iii) The foreign refiner has made the

commitments required in paragraph (i)

of this section;

(iv) The persons who will meet the

independent third party and

independent attest requirements for the

foreign refinery have made the

commitments required in paragraphs

(f)(3)(iii) and (h)(7)(iii) of this section;

and

(v) The foreign refiner has met the

bond requirements of paragraph (k) of

this section.

(2) In any case where a foreign refiner

uses an individual refinery baseline

before final approval under paragraph

(r)(1) of this section, and the foreign

refinery baseline values that ultimately

are approved by EPA are more stringent

than the early baseline values used by

the foreign refiner, the foreign refiner

shall recalculate its compliance, ab

initio, using the baseline values

approved by EPA, and the foreign

refiner shall be liable for any resulting

violation of the conventional gasoline

requirements.

(s) Additional requirements for

petitions, reports and certificates. Any

petition for a refinery baseline under

§ 80.250 or § 80.295, any alternative

procedures under paragraph (r) of this

section, any report or other submission

required by paragraphs (c), (f)(2), or (i)

of this section, and any certification

under paragraph (d)(3) of this section

shall be:

(1) Submitted in accordance with

procedures specified by the

Administrator, including use of any

forms that may be specified by the

Administrator; and

(2) Be signed by the president or

owner of the foreign refiner company, or

by that person’s immediate designee,

and shall contain the following

declaration:

I hereby certify: (1) that I have actual

authority to sign on behalf of and to bind

[insert name of foreign refiner] with regard to

all statements contained herein; (2) that I am

aware that the information contained herein

is being certified, or submitted to the United

States Environmental Protection Agency,

under the requirements of 40 CFR. Part 80,

subpart H, and that the information is

material for determining compliance under

these regulations; and (3) that I have read and

understand the information being certified or

submitted, and this information is true,

complete and correct to the best of my

knowledge and belief after I have taken

reasonable and appropriate steps to verify the

accuracy thereof.

I affirm that I have read and understand the

provisions of 40 CFR Part 80, subpart H,

including 40 CFR 80.410 [insert name of

foreign refiner]. Pursuant to Clean Air Act

section 113(c) and Title 18, United States

Code, section 1001, the penalty for furnishing

false, incomplete or misleading information

in this certification or submission is a fine of

up to $10,000, and/or imprisonment for up

to five years.

Attest Engagements

§ 80.415 What are the attest engagement

requirements for gasoline sulfur

compliance applicable to refiners and

importers?

In addition to the requirements for

attest engagements that apply to refiners

and importers under §§ 80.125 through

80.130, and § 80.410, the attest

engagements for importers and refiners

must include the following procedures

and requirements each year.

(a) Baseline. (1) Obtain the EPA sulfur

baseline approval letter for the refinery

to determine the refinery’s applicable

sulfur baseline and baseline volume

under §§ 80.250 or 80.295.

(2) If the year being reviewed is 2004

through 2006 (2007 for refineries with

small refiner status) and the refinery or

importer produced or imported any

GPA gasoline under § 80.216 or the

refiner has approved status for a small

refinery:

(i) Obtain the refinery’s annual sulfur

reports for 2000 through 2003; and

(ii) Determine whether the annual

average sulfur level for any year credits

were generated for 2000 through 2003

was less than the baseline level under

paragraph (a)(1) of this section.

(3) If the annual average sulfur

content for any year credits were created

for 2000 through 2003 was less than the

baseline level under paragraph (a)(1) of

this section, report as a finding the

lowest annual sulfur level as the new

baseline value. For GPA gasoline add 30

ppm to obtain the GPA standard, not to

exceed 150 ppm.

(4) If the refinery being reviewed is a

small refinery and the annual volume

under paragraph (b)(2) of this section is

greater than the baseline volume,

calculate the applicable standard in

accordance with § 80.240(c).

(5) Obtain a written representation

from the company representative stating

the sulfur value that the company used

as its baseline and agree that number to

paragraphs (a)(1) through (a)(4) of this

section and to the reports to EPA.

(b) EPA reports. (1) Obtain and read

a copy of the refinery’s or importer’s

annual sulfur reports filed with EPA for

the year.

(2) Agree the yearly volume of

gasoline reported to EPA in the sulfur

reports with the inventory

reconciliation analysis under § 80.128.

(3) For the years 2004 through 2006,

calculate the annual volume and

average sulfur level for gasoline

classified as GPA gasoline under

§§ 80.216 and 80.219, and calculate the

annual volume and average sulfur level

for gasoline not classified as GPA

gasoline, and agree these values with

the values reported to EPA.

(4) Except as provided in paragraph

(b)(3) of this section, calculate the

annual average sulfur level for all

gasoline and agree that value with the

value reported to EPA.

(5) Obtain and read a copy of the

refinery’s or importer’s sulfur credit

report.

(c) Credit generation before 2004. In

the case of a refinery that only generates

credits during 2000 through 2003:

(1) Obtain a written representation

from the company representative stating

the refinery produces gasoline from

crude oil.

(2) Compute and report as a finding

the sulfur baseline from paragraph (a) of

this section multiplied by 0.9.

(3) Obtain the annual average sulfur

level from paragraph (b)(4) of this

section.

(4) If the sulfur value under paragraph

(c)(3) of this section is less than the

sulfur value under paragraph (c)(2) of

this section, compute and report as a

finding the difference between the

annual average sulfur level and the

refinery’s sulfur baseline from

paragraph (a) of this section.

(5) Compute and report as a finding

the total number of sulfur credits

generated by multiplying the value in

paragraph (c)(4) of this section by the

volume of gasoline in paragraph (b)(2) of

this section, and agree this value with

the value reported to EPA.

(d) Credit generation in 2004 and

thereafter. The following procedures

shall be completed for a refinery or

importer that generates credits in 2004

and thereafter:

(1) Obtain the annual average sulfur

level for gasoline not classified as GPA

from paragraph (b)(3) of this section.

(2) If the sulfur value under paragraph

(d)(1) of this section is less than 30 ppm,

compute and report as a finding the

difference between the sulfur level

under paragraph (d)(1) of this section

and 30 ppm.

(3) Compute and report as a finding

the total number of sulfur credits

generated by multiplying the value

calculated in paragraph (d)(2) of this

6846 Federal Register / Vol. 65, No. 28 / Thursday, February 10, 2000 / Rules and Regulations

section by the volume of gasoline not

classified as GPA in paragraph (b)(3) of

this section, and agree this number with

the number reported to EPA.

(4) Obtain the annual average sulfur

level for gasoline classified as GPA from

paragraph (b)(3) of this section.

(5) If the sulfur value under paragraph

(d)(4) of this section is less than the

applicable level under § 80.310,

compute and report as a finding the

difference between the sulfur level

under paragraph (d)(4) of this section

and the appropriate level in § 80.310 .

(6) Compute and report as a finding

the total number of sulfur credits

generated by multiplying the value

calculated in paragraph (d)(5) of this

section by the volume of gasoline

classified as GPA in paragraph (b)(3) of

this section, and agree this number with

the number reported to EPA.

(7) If the refiner has an approved

status as a small refinery, obtain the

annual average sulfur level for gasoline

from paragraph (b)(4) of this section.

(8) If the sulfur value under paragraph

(d)(7) of this section is less than the

applicable standard under § 80.240,

compute and report as a finding the

difference between the sulfur level

under paragraph (d)(7) of this section

and the appropriate standard under

§ 80.240.

(9) Compute and report as a finding

the total number of sulfur credits

generated by multiplying the value

calculated in paragraph (d)(8) of this

section by the volume of gasoline in

paragraph (b)(4) of this section, and

agree this number with the number

reported to EPA.

(e) Credit purchases and sales. The

following attest procedures shall be

completed for a refinery or importer that

is a transferor or transferee of credits

during an averaging period:

(1) Obtain contracts or other

documents for all credits transferred to

another refinery or importer during the

year being reviewed; compute and

report as a finding the number and year

of creation of credits represented in

these documents as being transferred

away; and agree with the report to EPA.

(2) Obtain contracts or other

documents for all credits received

during the year being reviewed;

compute and report as a finding the

number and year of creation of credits

represented in these documents as being

received; and agree with the report to

EPA.

(f) Credits required for non-GPA

gasoline. The following attest

procedures shall be completed for

refineries and importers in 2005 and

thereafter (2004 and thereafter for

refineries having standards under

§ 80.240):

(1) Obtain the annual average sulfur

level for gasoline not classified as GPA

from paragraph (b)(3) of this section.

(2) If the value in paragraph (f)(1) of

this section is greater than 30 ppm (or

greater than the small refinery

standard), compute and report as a

finding the difference between 30 ppm

(or the standard under § 80.240) and the

value in paragraph (f)(1) of this section.

(3) Compute and report as a finding

the total sulfur credits required by

multiplying the value in paragraph (f)(2)

of this section times the volume of

gasoline not classified as GPA in

paragraph (b)(3) of this section, and

agree with the report to EPA.

(4) Obtain the refiner’s or importer’s

representation as to the portion of the

deficit under paragraph (f)(3) of this

section that was resolved with credits,

the portion that was resolved with

allotments in 2005 only or that was

carried forward as a deficit under

§ 80.205, and agree with the report to

EPA (refineries subject to standards

under § 80.240 cannot carry deficits

forward).

(g) Credits required for GPA gasoline.

The following attest procedures shall be

completed in 2004 through 2006 for a

refinery or importer that produces

gasoline subject to the geographic

phase-in area standards under § 80.216:

(1) Obtain the annual average sulfur

level for the refinery’s or importer’s

GPA gasoline from paragraph (b)(3) of

this section.

(2) If the value in paragraph (g)(1) of

this section is greater than the refinery’s

or importer’s baseline plus 30 ppm

under § 80.216, as determined in

paragraph (a) of this section or 150 ppm,

whichever is less, compute and report

as a finding the difference between the

annual average sulfur level and the

baseline level plus 30 ppm, or 150 ppm,

whichever is less.

(3) Compute and report as a finding

the total sulfur credits and/or allotments

required by multiplying the value in

paragraph (g)(2) of this section times the

volume of GPA gasoline from paragraph

(b)(3) of this section.

(4) Obtain the refiner’s or importer’s

representation as to the portion of the

deficit under paragraph (g)(3) of this

section that was resolved with credits,

or the portion that was resolved with

allotments in 2004 or 2005 only

(compliance deficits for GPA gasoline

cannot be carried forward.

(h) Credit expiration. The following

attest procedures shall be completed for

a refinery or importer that possesses

credits during an averaging period:

(1) Obtain a list of all credits in the

refiner’s or importer’s possession at any

time during the year being reviewed,

identified by the year of creation of the

credits.

(2) If the year being reviewed is 2006

and thereafter, except in the case of

gasoline produced for use in the GPA

and gasoline produced by small refiners,

determine whether any credits

identified in paragraph (h)(1) of this

section or Type A sulfur allotments

created under paragraph (i) of this

section and converted to credits were

created before 2004, and if so, report as

a finding this number of expired credits.

(3) If the year being reviewed is 2008

and thereafter, determine whether any

credits identified in paragraph (h)(1) of

this section or Type B sulfur allotments

created under paragraph (i) of this

section and converted to credits were

created more than 5 years before the

year being reviewed, and if so, report as

a finding this number of expired credits

(for example, unused credits created

during the 2004 averaging period expire

at the end of the 2009 averaging period).

(i) Optional credit and allotment

generation in 2003. The following

requirements apply to any refinery that

generates credits and allotments in 2003

under § 80.275(a):

(1) Obtain a written representation

from the company representative stating

the refinery produces gasoline from

crude oil.

(2) Obtain the refinery baseline value

from paragraph (b)(1) of this section, the

annual volume from paragraph (b)(2) of

this section and the annual average

sulfur level from paragraph (b)(4) of this

section.

(3) Based on the annual sulfur level

and refinery baseline, determine which

equation under § 80.275(a)(2) applies.

(4) Using the applicable equations

under § 80.275(a)(2), recalculate the

sulfur allotments, by type, and credits

and report as a finding.

(j) Credit reconciliation. The following

attest procedures shall be completed

each year credits were in the refiner’s or

importer’s possession at any time during

the year:

(1) Obtain the credits remaining or the

credit deficit from the previous year

from the refiner’s or importer’s report to

EPA for the previous year.

(2) Compute and report as a finding

the net credits remaining at the

conclusion of the year being reviewed

by totaling:

(i) Credits remaining from the

previous year; plus

(ii) Credits generated under

paragraphs (c), (d) and (i) of this section;

plus

Federal Register / Vol. 65, No. 28 / Thursday, February 10, 2000 / Rules and Regulations 6847

(iii) Allotments generated under

paragraph (i) of this section which are

converted to credits; plus

(iv) Credits purchased under

paragraph (e) of this section; minus

(v) Credits sold under paragraph (e) of

this section; minus

(vi) Credits used under paragraphs (f)

and (g) of this section; minus

(vii) Credits expiring under paragraph

(h) of this section; minus

(viii) Credit deficit from the previous

year.

(3) Agree the credits remaining or the

credit deficit at the conclusion of the

year being reviewed with the report to

EPA.

(4) If the refinery or importer had a

credit deficit for both the previous year

and the year being reviewed, report this

fact as a finding.

(k) Sulfur allotments in 2004 and

2005. The following requirements apply

to any refinery or importer that is

subject to corporate pool average

standards under § 80.195:

(1) Corporate pool average. (i) Obtain

the annual average sulfur level for the

refiner or importer from the sulfur

report filed with EPA for all gasoline

subject to corporate pool standards (all

gasoline produced and imported, except

that if 50% or greater of the gasoline

volume was GPA gasoline the refiner or

importer is not subject to the corporate

pool average).

(ii) Compute and report as a finding

the company’s gasoline volume subject

to corporate pool standards and average

sulfur level for gasoline subject to

corporate pool standards, and agree

with the values reported to EPA.

(2) Allotment generation. (i) For 2004,

if the corporate pool average is less than

120 ppm, compute and report as a

finding the number and type of sulfur

allotments generated in accordance with

the applicable provisions under

§ 80.275(b).

(ii) For 2005, if the corporate pool

average is less than 90 ppm, compute

and report as a finding the number and

type of sulfur allotments generated in

accordance with the applicable

provisions under § 80.275(b).

(iii) If the refiner or importer

produced and imported 50% or more of

its gasoline for GPA use in 2004 or 2005,

no allotments can be generated in that

year.

(3) Allotment purchases and sales. (i)

Obtain contracts or other documents for

all allotments transferred to another

company during the year being

reviewed; compute and report as a

finding the number of allotments

represented in these documents as being

transferred away; and agree with the

report to EPA.

(ii) Obtain contracts or other

documents for all allotments received

during the year being reviewed;

compute and report as a finding the

number of allotments represented in

these documents as being received; and

agree with the report to EPA.

(4) Allotments required. (i) For 2004,

if the corporate pool average is greater

than 120 ppm, compute and report as a

finding the number of allotments

required by multiplying the amount the

corporate pool average is above 120

ppm times the corporate pool volume,

and agree with the report to EPA.

(ii) For 2005, if the corporate pool

average is greater than 90 ppm, compute

and report as a finding the number of

allotments required by multiplying the

amount the corporate pool average is

above 90 ppm times the corporate pool

volume, and agree with the report to

EPA.

(iii) Obtain the number of allotments

used to meet standards for GPA gasoline

determined in paragraph (g) of this

section.

(5) Allotment reconciliation. (i)

Compute and report as a finding the net

allotments remaining at the conclusion

of the year being reviewed by totaling

allotments:

(A) Generated under paragraphs (i)(4)

and (k)(2) of this section; plus

(B) Purchased under paragraph (k)(3)

of this section; minus

(C) Sold under paragraph (k)(3) of this

section; minus

(D) Used under paragraph (k)(4) of

this section for demonstrating

compliance with the corporate pool

average.

(ii) Report as a finding any allotments

generated in 2003 or 2004 that are used

to meet the corporate pool standards in

2005 that were not reduced to 50% of

their original value.

(iii) If the company’s net allotments

remaining are less than zero, report this

fact as a finding.

PART 85—CONTROL OF AIR

POLLUTION FROM MOBILE SOURCES

5. The authority citation for part 85

continues to read as follows:

Authority: 42 U.S.C. 7521, 7522, 7524,

7525, 7541, 7542, 7601(a).

6. Section 85.1515 is amended by:

a. redesignating the existing

paragraph (c) as paragraph (c)(1),

b. adding new paragraphs (c)(2),

(c)(3), (c)(5), (c)(6) and (c)(7), and adding

and reserving paragraph (c)(4), and

c. revising paragraph (d).

The revisions and additions read as

follows:

§ 85.1515 Emission standards and test

procedures applicable to imported

nonconforming motor vehicles and motor

vehicle engines.

* * * * *

(c)(1) * * *

(2)(i) The provisions of paragraph

(c)(1) of this section notwithstanding,

nonconforming light-duty vehicles and

light light-duty trucks (LDV/LLDTs)

modified in model years 2004, 2005 or

2006 must meet the FTP exhaust

emission standards of bin 9 in Tables

S04–1 and S04–2 in 40 CFR 86.1811–04

and the evaporative emission standards

for light-duty vehicles and light lightduty trucks specified in 40 CFR

86.1811–04(e)(5).

(ii) Nonconforming LDT3s and LDT4s

(HLDTs) and medium-duty passenger

vehicles (MDPVs) modified in model

years 2004 through 2006 must meet the

FTP exhaust emission standards of bin

10 in Tables S04–1 and S04–2 in 40 CFR

86.1811–04 and the applicable

evaporative standards specified in 40

CFR 86.1811–04(e)(5). For 2004 model

year HLDTs and MDPVs where

modifications commence on the first

vehicle of a test group before December

21, 2003, this requirement does not

apply to the 2004 model year. ICIs

opting to bring all of their 2004 model

year HLDTs and MDPVs into

compliance with the exhaust emission

standards of bin 10 in Tables S04–1 and

S04–2 in 40 CFR 86.1811–04, may use

the optional higher NMOG values for

their 2004–2006 model year LDT2s and

2004–2008 LDT4s.

(iii) Nonconforming LDT3s and

LDT4s (HLDTs) and medium-duty

passenger vehicles (MDPVs) modified in

model years 2007 and 2008 must meet

the FTP exhaust emission standards of

bin 8 in Tables S04–1 and S04–2 in 40

CFR 86.1811–04 and the applicable

evaporative standards specified in 40

CFR 86.1811–04(e)(5).

(iv) Nonconforming LDV/LLDTs

modified in model years 2007 and later

and nonconfoming HLDTs and MDPVs

modified in model years 2009 and later

must meet the FTP exhaust emission

standards of bin 5 in Tables S04–1 and

S04–2 of 40 CFR 86.1811–04, and the

evaporative standards specified in 40

CFR 86.1811(e)(1) through (e)(4).

(v) ICIs are exempt from the Tier 2

and the interim non-Tier 2 phase-in

intermediate percentage requirements

for exhaust, evaporative and refueling

emissions described in 40 CFR 86.1811–

04.

(3)(i) As an option to the requirements

of paragraph (c)(2) of this section,

independent commercial importers may

elect to meet lower bins in Tables S04–

1 and S04–2 of 40 CFR 86.1811–04 than

6848 Federal Register / Vol. 65, No. 28 / Thursday, February 10, 2000 / Rules and Regulations

specified in paragraph (c)(2) of this

section and bank or sell credits as

permitted in 40 CFR 86.1860–04 and 40

CFR 86.1861–04. An ICI may not meet

higher bins in Tables S04–1 and S04–2

of 40 CFR 86.1811–04 than specified in

paragraph (c)(2) of this section unless it

demonstrates to the Administrator at the

time of certification that it has obtained

appropriate and sufficient NOX credits

from another manufacturer, or has

generated them in a previous model

year or in the current model year and

not transferred them to another

manufacturer or used them to address

other vehicles as permitted in 40 CFR

86.1860–04 and 40 CFR 86.1861–04.

(ii) Where an ICI desires to obtain a

certificate of conformity using a bin

higher than specified in paragraph (c)(2)

of this section, but does not have

sufficient credits to cover vehicles

produced under such certificate, the

Administrator may issue such certificate

if the ICI has also obtained a certificate

of conformity for vehicles certified

using a bin lower than that required

under paragraph (c)(2) of this section.

The ICI may then produce vehicles to

the higher bin only to the extent that it

has generated sufficient credits from

vehicles certified to the lower bin

during the same model year.

(4) [Reserved]

(5) Except for the situation where an

ICI desires to bank, sell or use NOX

credits as described in paragraph (c)(3)

of this section, the requirements of 40

CFR 86.1811–04 related to fleet average

NOX standards and requirements to

comply with such standards do not

apply to vehicles modified under this

subpart.

(6) ICIs using bins higher than those

specified in paragraph (c)(2) of this

section must monitor their production

so that they do not produce more

vehicles certified to the standards of

such bins than their available credits

can cover. ICIs must not have a credit

deficit at the end of a model year and

are not permitted to use the deficit

carryforward provisions provided in 40

CFR 86.1860–04(e).

(7) The Administrator may condition

the certificates of conformity issued to

ICIs as necessary to ensure that vehicles

subject to paragraph (c) of this section

comply with the appropriate average

NOX standard for each model year.

(d) Except as provided in paragraph

(c) of this section, ICI’s must not

participate in emission-related programs

for emissions averaging, banking and

trading, or nonconformance penalties.

* * * * *

PART 86—CONTROL OF EMISSIONS

FROM NEW AND IN-USE HIGHWAY

VEHICLES AND ENGINES

7. The authority citation for part 86

continues to read as follows:

Authority: 42 U.S.C. 7401–7671q.

8. In § 86.1 the table in paragraph

(b)(4) is amended by revising the entry

for ‘‘California Regulatory Requirements

Applicable to the ‘LEV II’ Program’’ in

alphabetical order and by revising the

entry for ‘‘California Regulatory

Requirements Applicable to the

National Low Emission Vehicle

Program, October 1996’’, to read as

follows:

§ 86.1 Reference materials.

* * * * *

(b) * * *

(4) * * *

Document No. and name 40 CFR part 86 reference

California Regulatory Requirements Applicable to the ‘‘LEV II’’ Program, including:.

1. California Exhaust Emission Standards and Test Procedures for

2003 and Subsequent Model Zero-Emission Vehicles and 2001

and Subsequent Model Hybrid Electric Vehicles, in the Passenger Car, Light-duty Truck and Medium-duty Vehicle Classes.

August 5, 1999.

86.1806–01; 86.1811–04; 86.1844–01.

2. California Non-Methane Organic Gas Test Procedures. August

5, 1999.

86.1803–01; 86.1810–01; 86.1811–04.

California Regulatory Requirements Applicable to the National Low

Emission Vehicle Program, October 1996.

86.113–004; 86.612–97; 86.1012–97; 86.1702–99; 86.1708–99;

86.1709–99; 86.1717–99; 86.1735–99; 86.1771–99; 86.1775–99;

86.1776–99; 86.1777–99; Appendix XVI; Appendix XVII.

* * * * *

Subpart A—General Provisions for

Emission Regulations for 1977 and

Later Model Year New Light-Duty

Vehicles, Light-Duty Trucks and

Heavy-Duty Engines, and for 1985 and

Later Model Year New GasolineFueled, Natural Gas-Fueled, Liquefied

Petroleum Gas-Fueled and MethanolFueled Heavy-Duty Vehicles

9. Section 86.004–11 is amended by

adding paragraph (e) to read as follows:

§ 86.004–11 Emission standards for 2004

and later model year diesel heavy-duty

engines and vehicles.

* * * * *

(e) The standards described in this

section do not apply to diesel-fueled

medium-duty passenger vehicles

(MDPVs) that are subject to regulation

under subpart S of this part, except as

specified in subpart S of this part. The

standards described in this section also

do not apply to diesel engines used in

such MDPVs, except as specified in the

regulations in subpart S of this part. The

term ‘‘medium-duty passenger vehicle’’

is defined in § 86.1803.

10. Section 86.099–10 is amended by

adding paragraph (e) to read as follows:

§ 86.099–10 Emission standards for 1999

and later model year Otto-cycle heavy-duty

engines and vehicles.

* * * * *

(e) The standards described in this

section do not apply to Otto-cycle

medium-duty passenger vehicles

(MDPVs) that are subject to regulation

under subpart S of this part, except as

specified in subpart S of this part. The

standards described in this section also

do not apply to Otto-cycle engines used

in such MDPVs, except as specified in

subpart S of this part. The term

‘‘medium-duty passenger vehicle’’ is

defined in § 86.1803.

10a. The heading of Subpart B is

revised to read as follows:

Subpart B—Emission Regulations for

1977 and Later Model Year New Lightduty Vehicles, New Light-duty Trucks

and New Medium-Duty Passenger

Vehicles; Test Procedures

11. Section 86.113–04 is added to

read as follows:

§ 86.113–04 Fuel specifications.

This section includes text that

specifies requirements that differ from

§ 86.113–94. Where a paragraph in

§ 86.113–94 is identical and applicable

to this section, this will be indicated by

specifying the corresponding paragraph

Federal Register / Vol. 65, No. 28 / Thursday, February 10, 2000 / Rules and Regulations 6849

and the statement ‘‘[Reserved]. For

guidance see § 86.113–94.’’.

(a) Gasoline fuel. (1) Gasoline having

the following specifications will be used

by the Administrator in exhaust and

evaporative emission testing of

petroleum-fueled Otto-cycle vehicles,

except that the Administrator will not

use gasoline having a sulfur

specification higher than 0.0045 weight

percent. Gasoline having the following

specification or substantially equivalent

specifications approved by the

Administrator, must be used by the

manufacturer in exhaust and

evaporative testing except that octane

specifications do not apply:

Item ASTM test method No. Value

Octane, Research, Min. ......................................................................... D 2699 ...................................................................... 93

Sensitivity, Min. ...................................................................................... ............................................................................... 7.5

Lead (organic), max. g/U.S. gal. (g/liter) ............................................... D 3237 ...................................................................... 0.050 (0.013)

Distillation Range: D 86 ..........................................................................

IBP1:deg. F (deg. C) ................................................................ ............................................................................... 75–95 (23.9–35)

10 pct. point: deg.F (deg.C) .................................................... ............................................................................... 120–135 (48.9–

57.2)

50 pct. point: deg.F. (deg.C) ................................................... ............................................................................... 200–230 (93.3–

110)

90 pct. point: deg.F (deg.C) .................................................... ............................................................................... 300–325 (148.9–

162.8)

EP, max: deg.F (deg.C) ........................................................... ............................................................................... 415 (212.8)

Sulfur, weight pct. .................................................................................. D 1266 ...................................................................... 0.0015–0.008

Phosphorous, max. g/U.S. gal (g/liter) ................................................... D 3231 ...................................................................... 0.005 (0.0013)

RVP 2,3 ................................................................................................... D 3231 ...................................................................... 8.7–9.2 (60.0–

63.4)

Hydrocarbon composition: D 1319 ......................................................................

Olefins, max. pct. ..................................................................... ............................................................................... 10

Aromatics, max, pct. ................................................................ ............................................................................... 35

Saturates .................................................................................. ............................................................................... Remainder

1For testing at altitudes above 1,219 m (4000 feet), the specified range is 75–105 deg. F (23.9–40.6 deg. C).

2For testing which is unrelated to evaporative emission control, the specified range is 8.0-9.2 psi (55.2–63.4 kPa).

3For testing at altitudes above 1,219 m (4000 feet), the specified range is 7.6–8.0 psi (52-55 kPa).

(2) For light-duty vehicles, light-duty

trucks and medium-duty passenger

vehicles certified for 50 state sale, and

for Tier 2 and interim non-Tier 2

vehicles whose certification is carried

over from the NLEV program or carried

across from the California LEV I

program, ‘‘California Phase 2’’ gasoline

having the specifications listed in the

table in this section may be used in

exhaust emission testing as an option to

the specifications in paragraph (a)(1) of

this section. If a manufacturer elects to

utilize this option, the manufacturer

must conduct exhaust emission testing

with gasoline having the specifications

listed in the table in this paragraph

(a)(2) and in the case of interim non-Tier

2 LDV/Ts and interim non-Tier 2

MDPVs whose certification is carried

over from the NLEV program or carried

across from California LEV I program

certification the Administrator must

also conduct exhaust emission testing

with gasoline having the specifications

listed in the table in this paragraph

(a)(2) . However, the Administrator may

use or require the use of test fuel

meeting the specifications in paragraph

(a)(1) of this section for certification

confirmatory testing, selective

enforcement auditing and in-use testing

for all other vehicles. All fuel property

test methods for this fuel are contained

in Chapter 4 of the California Regulatory

Requirements Applicable to the

National Low Emission Vehicle Program

(October, 1996). These requirements are

incorporated by reference (see § 86.1).

The table follows:

Fuel property Limit

Octane, (R+M)/2 (min) .............................................................................. 91

Sensitivity (min) ......................................................................................... 7.5

Lead, g/gal (max) (No lead added) .......................................................... 0–0.01

Distillation range, °F.

10 pct. point, ............................................................................................. 130–150

50 pct. point, ............................................................................................. 200–210

90 pct. point, ............................................................................................. 290–300

EP, maximum ............................................................................................ 390

Residue, vol% (max) ................................................................................. 2.0

Sulfur, ppm by wt. ..................................................................................... 15–40, except that administrator may use and approve for use, lower

ranges where such ranges are consistent with current California requirements.

Phosphorous, g/gal (max) ......................................................................... 0.005

RVP, psi .................................................................................................... 6.7–7.0

Olefins, vol% ............................................................................................. 4.0–6.0

Total aromatic hydrocarbons (vol%) ......................................................... 22–25

Benzene, vol% .......................................................................................... 0.8–1.0

Multi-substituted alkyl Aromatic hydrocarbons, vol% ............................... 12–14

MTBE, vol % ............................................................................................. 10.8–11.2

Additives: ................................................................................................... See chapter 4 of the California Regulatory Requirements Applicable to

the National Low Emission Vehicle Program (October, 1996). These

procedures are incorporated by reference (see § 86.1).

6850 Federal Register / Vol. 65, No. 28 / Thursday, February 10, 2000 / Rules and Regulations

Fuel property Limit

Copper corrosion ...................................................................................... No. 1.

Gum, washed, mg/100 ml (max) .............................................................. 3.0

Oxidation stability, minutes (min) .............................................................. 1000

Specific gravity .......................................................................................... No limit; report to purchaser required.

Heat of combustion ................................................................................... No limit; report to purchaser required.

Carbon, wt% ............................................................................................. No limit; report to purchaser required.

Hydrogen, wt% .......................................................................................... No limit; report to purchaser required.

(3)(i) Unless otherwise approved by

the Administrator, unleaded gasoline

representative of commercial gasoline

that will be generally available through

retail outlets must be used in service

accumulation. For model years 2004

and later, and unless otherwise

approved by the Administrator, this

gasoline must have a minimum sulfur

content of 15 ppm. Unless otherwise

approved by the Administrator, where

the vehicle is to be used for evaporative

emission durability demonstration, such

fuel must contain ethanol as required by

§ 86.1824–01(a)(2)(iii). Leaded gasoline

must not be used in service

accumulation.

(ii) Unless otherwise approved by the

Administrator, the octane rating of the

gasoline used must be no higher than

1.0 Retail octane number above the

lowest octane rating that meets the fuel

grade the manufacturer will recommend

to the ultimate purchaser for the

relevant production vehicles. If the

manufacturer recommends a Retail

octane number rather than a fuel grade,

then the octane rating of the service

accumulation gasoline can be no higher

than 1.0 Retail octane number above the

recommended Retail octane number.

The service accumulation gasoline must

also have a minimum sensitivity of 7.5

octane numbers, where sensitivity is

defined as the Research octane number

minus the Motor octane number.

(iii) The Reid Vapor Pressure of the

gasoline used must be characteristic of

the motor fuel used during the season in

which the service accumulation takes

place.

(4) The specification range of the

gasoline to be used under this paragraph

(a) must be reported in accordance with

§§ 86.094–21(b)(3) and 86.1844–01.

(b) through (g) [Reserved]. For

guidance see § 86.113–94.

12. Section 86.129–00 is amended by

adding a new paragraph (f)(1)(ii)(C) to

read as follows:

§ 86.129–00 Road load power, test weight,

and inertia weight class determination.

* * * * *

(f)* * *

(1)* * *

(ii)* * *

(C) Regardless of other requirements

in this section relating to the testing of

HLDTs, for Tier 2 HLDTs, the test

weight basis for FTP and SFTP testing

(both US06 and SC03), if applicable, is

the vehicle curb weight plus 300

pounds. For MDPVs certified to

standards in bin 11 in Tables S04–1 and

2 in § 86.1811–04, the test weight basis

must be adjusted loaded vehicle weight

(ALVW) as defined in this part.

* * * * *

12.a. The heading of Subpart C is

revised to read as follows:

Subpart C—Emission Regulations for

1994 and Later Model Year GasolineFueled New Light-Duty Vehicles, New

Light-Duty Trucks and New MediumDuty Passenger Vehicles; Cold

Temperature Test Procedures

13. Section 86.213–04 is added to

read as follows:

§ 86.213–04 Fuel specifications.

Gasoline having the following

specifications will be used by the

Administrator except that the

Administrator will not use gasoline

having a sulfur specification higher than

0.0045 weight percent. Gasoline having

the specifications set forth in the table

in this section, or substantially

equivalent specifications approved by

the Administrator, may be used by the

manufacturer except that the octane

specification does not apply. In lieu of

using gasoline having these

specifications, the manufacturer may,

for certification testing, use gasoline

having the specifications specified in

§ 86.113–04 provided the cold CO

emissions are not decreased.

Documentation showing that cold CO

emissions are not decreased must be

maintained by the manufacturer and

must be made available to the

Administrator upon request. The table

listing the cold CO fuel specifications

described in the text in this section

follows:

TABLE—COLD CO FUEL SPECIFICATIONS

Item ASTM test

Cold CO low octane value or

range

Cold CO high

octane 1 value or

range

(RON+MON)/2, min ............................................................................................................ D 2699 87.8±.3 92.3±0.5

Sensitivity, min .................................................................................................................... D 2699 7.5 7.5

Distillation range:.

IBP, deg.F ....................................................................................................................... D 86 76–96 76–96

10% point, deg.F. ............................................................................................................ D 86 98–118 105–125

50% point, deg.F. ............................................................................................................ D 86 179–214 195–225

90% point, deg.F. ............................................................................................................ D 86 316–346 316–346

EP, max, deg.F ............................................................................................................... D 86 413 413

Sulfur, wt. % ....................................................................................................................... D 3120 0.0015–0.008 0.0015–0.008

Phosphorous, g/U.S gal, max ............................................................................................. D 3231 0.005 0.005

Lead, g/gal, max ................................................................................................................. 0.01 0.01

RVP, psi .............................................................................................................................. D 4953 11.5±.3 11.5±.3

Hydrocarbon composition ................................................................................................... D 1319

Olefins, vol. pct ............................................................................................................... 12.5±5.0 10.0±5.0

Aromatics, vol. pct ........................................................................................................... 26.4±4.0 32.0±4.0

Saturates ......................................................................................................................... Remainder Remainder.

1Gasoline having these specifications may be used for vehicles which are designed for the use of high-octane premium fuel.

Federal Register / Vol. 65, No. 28 / Thursday, February 10, 2000 / Rules and Regulations 6851

Subpart R—General Provisions for the

Voluntary National Low Emission

Vehicle Program for Light-Duty

Vehicles and Light-Duty Trucks

14. Section 86.1701–99 is amended by

adding paragraph (f) to read as follows:

§ 86.1701–99 General applicability.

* * * * *

(f) The provisions of this subpart are

not applicable to 2004 or later model

year vehicles, except where specific

references to provisions of this subpart

are made in conjunction with provisions

applicable to such vehicles.

14.a. The title of subpart S is revised

to read as follows:

Subpart S—General Compliance

Provisions for Control of Air Pollution

From New and In-use Light-Duty

Vehicles, Light-Duty Trucks and

Medium Duty Passenger Vehicles

15. Section 86.1801–01 is amended

by:

a. revising the first sentence of

paragraph (a),

b. adding one sentence to the end of

paragraph (c)(1),

c. revising the first sentence of

paragraph (e), and

d. adding paragraphs (f), (g) and (h).

These revisions and additions read as

follows:

§ 86.1801–01 Applicability.

(a) Except as otherwise indicated, the

provisions of this subpart apply to new

2001 and later model year Otto-cycle

and diesel cycle light-duty vehicles,

light-duty trucks and medium-duty

passenger vehicles, including multifueled, alternative fueled, hybrid

electric, and zero emission vehicles.

***

* * * * *

(c) * * * (1) * * * A 2004 or later

model year heavy-duty vehicle

optionally certified as a light-duty truck

under this provision must comply with

all provisions applicable to MDPVs

including exhaust and evaporative

emission standards, test procedures, onboard diagnostics, refueling standards,

phase-in requirements and fleet average

standards under 40 CFR Part 85 and this

part.

* * * * *

(e) National Low Emission Vehicle

Program for light-duty vehicles and light

light-duty trucks. A manufacturer may

elect to certify 2001–2003 model year

light-duty vehicles and light light-duty

trucks (LDV/LLDTs) to the provisions of

the National Low Emission Vehicle

Program contained in Subpart R of this

part. * * *

(f) ‘‘Early’’ Tier 2 LDVs, LDTs and

MDPVs. Any LDV/LLDT which is

certified to Tier 2 FTP exhaust

standards prior to the 2004 model year,

or any HLDT or MDPV which is

certified to the Tier 2 FTP exhaust

standards prior to the 2008 model year,

to utilize alternate phase-in schedules

and/or for purposes of generating and

banking Tier 2 NOX credits, must

comply with all the exhaust emission

requirements applicable to Tier 2 LDV/

LLDTs or HLDT/ MDPVs, as applicable,

under this subpart.

(g) Interim non-Tier 2 LDVs, LDTs and

MDPVs. Model year 2004–2008 LDVs,

LDTs and MDPVs, that do not comply

with the Tier 2 FTP exhaust emission

requirements (interim non-Tier 2 LDV/

LLDTs and interim non-Tier 2 HLDT/

MDPVs) as permitted under the phasein requirements of § 86.1811–04(k) must

comply with all applicable interim nonTier 2 exhaust emission requirements

contained in this subpart, including FTP

exhaust emission requirements for all

interim non-Tier 2 LDV/LLDTs and

HLDT/MDPVs found at § 86.1811–04(l).

Additional emission bins and separate

fleet average NOX emission standards

and other provisions are provided for

interim non-Tier 2 LDV/LLDTs, and

interim non-Tier 2 HLDT/MDPVs.

(h) Applicablity of provisions of this

subpart to LDVs, LDTs and MDPVs.

Numerous sections in this subpart

provide requirements or procedures

applicable to a ‘‘vehicle’’ or ‘‘vehicles’’.

Unless otherwise specified or otherwise

determined by the Administrator, the

term ‘‘vehicle’’ or ‘‘vehicles’’ in those

provisions apply equally to LDVs, LDTs

and MDPVs.

16. Section 86.1803–01 is amended by

adding the following definitions in

alphabetical order to read as follows:

§ 86.1803–01 Definitions.

* * * * *

Bin or emission bin means a set of

emission standards applicable to

exhaust pollutants measured on the

Federal Test Procedure (FTP). A bin is

equivalent to a horizontal row of FTP

standards in Tables S04–1 and S04–2

shown in this subpart. Manufacturers

are generally free to choose the bin of

standards that will apply to a certain

test group of vehicles, provided that on

a sales weighted average of those bins,

all of their vehicles meet a specified

fleet average standard for a particular

pollutant.

* * * * *

CalLEV II or California LEV II refers

to California’s second phase of its low

emission vehicle (LEV) program. This

program was adopted at the hearing of

the California Air Resources Board held

on November 5, 1998 and became

effective on November 27, 1999.

* * * * *

Fleet average NOX standard means,

for light-duty vehicles, light-duty trucks

and medium-duty passenger vehicles, a

NOX standard imposed over an

individual manufacturer’s total U.S.

sales (or a fraction of total U.S. sales

during phase-in years), as ‘U.S. sales’’ is

defined in this subpart, of a given model

year. Manufacturers determine their

compliance with such a standard by

averaging, on a sales weighted basis, the

individual NOX standards they choose

for the fleet of light-duty vehicles, lightduty trucks and medium-duty passenger

vehicles they sell of that model year.

* * * * *

Interim non-Tier 2 vehicle, interim

non-Tier 2 LDV/LLDT, interim non-Tier

2 HLDT/MDPV, or interim vehicle refer

to 2004 or later model year light-duty

vehicles, light-duty trucks or MDPVs, or

a specific combination thereof, not

certified to Tier 2 FTP exhaust emission

standards during the Tier 2 phase-in

period. Model year 2004 HLDTs

belonging to test groups whose model

year commences before December 21,

2003, are not interim non-Tier 2 HLDTs

unless their manufacturer chooses to

comply with the interim requirements

applicable to HLDTs for all of its 2004

model year HLDTs as permitted in this

subpart. Similarly 2004 model year

heavy-duty vehicles whose model year

commences before December 21, 2003,

are not interim non-Tier 2 MDPVs

unless their manufacturer chooses to

comply with the interim requirements

applicable to MDPVs for all of its 2004

model year MDPVs as permitted in this

subpart. The terms interim non-Tier 2

vehicle, interim non-Tier 2 LDV, interim

non-Tier 2 LDT, interim non-Tier 2

HLDT, interim non-Tier 2 MDPV, etc.

have the same meaning without the

words ‘‘non-Tier 2’’.

* * * * *

LDV/T means light-duty vehicles and

light-duty trucks collectively, without

regard to category.

* * * * *

Medium-duty passenger vehicle

(MDPV) means any heavy-duty vehicle

6852 Federal Register / Vol. 65, No. 28 / Thursday, February 10, 2000 / Rules and Regulations

(as defined in this subpart) with a gross

vehicle weight rating (GVWR) of less

than 10,000 pounds that is designed

primarily for the transportation of

persons. The MDPV definition does not

include any vehicle which:

(1) Is an ‘‘incomplete truck’’ as

defined in this subpart; or

(2) Has a seating capacity of more

than 12 persons; or

(3) Is designed for more than 9

persons in seating rearward of the

driver’s seat; or

(4) Is equipped with an open cargo

area (for example, a pick-up truck box

or bed) of 72.0 inches in interior length

or more. A covered box not readily

accessible from the passenger

compartment will be considered an

open cargo area for purposes of this

definition.

* * * * *

Non-methane organic gases (NMOG)

means the sum of oxygenated and nonoxygenated hydrocarbons contained in a

gas sample as measured in accordance

with the California Non-Methane

Organic Gas Test Procedures. These

requirements are incorporated by

reference (see § 86.1)

* * * * *

Periodically regenerating trap oxidizer

system means a trap oxidizer that

utilizes, during normal driving

conditions, an automated regeneration

mode for cleaning the trap, the

operation of which can be easily

detected.

* * * * *

Point of first sale means the location

where the completed vehicle is first

purchased. This term is synonymous

with final product purchase location.

The point of first sale may be a retail

customer, dealer, distributor, fleet

operator, broker, secondary

manufacturer, or any other entity which

purchases a vehicle from a

manufacturer. In cases where the end

user purchases the completed vehicle

directly from the manufacturer, the end

user is the point of first sale.

* * * * *

Round, rounded or rounding means,

unless otherwise specified, that

numbers will be rounded according to

ASTM–E29–93a, which is incorporated

by reference in this part pursuant to

§ 86.1.

* * * * *

Tier 2 HLDT/MDPV means any heavy

light-duty truck or medium-duty

passenger vehicle, including HEVs and

ZEVs, of the 2008 or later model year

certified to comply with the Tier 2 FTP

exhaust standards contained in

§ 86.1811–04 including the 0.07 g/mi

fleet average NOX standard. The term

Tier 2 HLDT/MDPV also includes any

heavy light-duty truck or medium-duty

passenger vehicle, of any model year,

which is certified to Tier 2 FTP exhaust

standards for purposes of generating or

banking early NOX credits for averaging

under Tier 2 requirements, or utilizing

alternate phase-in schedules, as allowed

in this subpart.

Tier 2 LDV/LLDT means any lightduty vehicle or light light-duty truck,

including HEVs and ZEVs, of the 2004

or later model year certified to comply

with the Tier 2 FTP exhaust standards

contained in § 86.1811–04 including the

0.07 g/mi fleet average NOX standard.

The term Tier 2 LDV/LLDT also

includes any light-duty vehicle or light

light-duty truck, of any model year,

which is certified to Tier 2 FTP exhaust

standards for purposes of generating or

banking early NOX credits for averaging

under Tier 2 requirements, or utilizing

alternate phase-in schedules as allowed

in this subpart.

Tier 2 standards means those FTP

exhaust emission standards including

the 0.07 g/mi full useful life fleet

average NOX standard, applicable to

new light-duty vehicles and light lightduty trucks that begin a phase-in in the

2004 model year, and those exhaust

emission standards including the 0.07 g/

mi full useful life fleet average NOX

standard, applicable to heavy light-duty

trucks and medium-duty passenger

vehicles that begin a phase-in in the

2008 model year. These standards are

found in § 86.1811–04 of this subpart.

Tier 2 vehicle means any vehicle

certified to comply with the Tier 2 FTP

exhaust standards contained in

§ 86.1811–04 including the 0.07 g/mi

fleet average NOX standard.

* * * * *

U.S. sales means, unless otherwise

specified, sales in any state of the

United States except for California or a

state that has adopted California motor

vehicle standards for that model year

pursuant to section 177 of the Clean Air

Act. This definition applies only to

those regulatory requirements

addressing Tier 2 and interim non-Tier

2 vehicles.

* * * * *

17. Section 86.1804–01 is amended by

adding the following acronyms and

abbreviations, in alphabetical order, to

read as follows:

§ 86.1804–01 Acronyms and abbreviations.

* * * * *

HCHO—Formaldehyde.

HEV—Hybrid electric vehicle.

* * * * *

HLDT—Heavy light-duty truck. Includes

only those trucks over 6000 pounds GVWR

(LDT3s and LDT4s).

HLDT/MDPV—Heavy light-duty trucks and

medium-duty passenger vehicles.

* * * * *

LDV/LLDT—Light-duty vehicles and light

light-duty trucks. Includes only those trucks

rated at 6000 pounds GVWR or less (LDT1s

and LDT2s).

LDV/T—Light-duty vehicles and light-duty

trucks. This term is used collectively to

include, or to show that a provision applies

to, all light-duty vehicles and all categories

of light-duty trucks, i.e.

LDT1, LDT2, LDT3 and LDT4.

LEV—Low Emission Vehicle.

* * * * *

MDPV—Medium-duty passenger vehicle.

* * * * *

NLEV—Refers to the National Low

Emission Vehicle Program. Regulations

governing this program are found at subpart

R of this part.

* * * * *

NMOG—Non-methane organic gases.

* * * * *

RAF—Reactivity adjustment factor.

* * * * *

SULEV—Super Ultra Low Emission

Vehicle.

* * * * *

TLEV—Transitional Low Emission

Vehicle.

* * * * *

ULEV—Ultra Low Emission Vehicle.

* * * * *

ZEV—Zero Emission Vehicle.

18. Section 86.1805–04 is added to

read as follows:

§ 86.1805–04 Useful life.

(a) Except as required under

paragraph (b) of this section or

permitted under paragraphs (d), (e) and

(f) of this section, the full useful life for

all LDVs, LDT1s and LDT2s is a period

of use of 10 years or 120,000 miles,

whichever occurs first. For all HLDTs

and MDPVs, full useful life is a period

of 11 years or 120,000 miles, whichever

occurs first. This full useful life applies

to all exhaust, evaporative and refueling

emission requirements except for

standards which are specified to only be

applicable at the time of certification.

(b) Manufacturers may elect to

optionally certify a test group to the Tier

2 exhaust emission standards for

150,000 miles to gain additional NOX

credits, as permitted in § 86.1860–04(g),

or to opt out of intermediate life

standards as permitted in § 86.1811–

04(c). In such cases, useful life is a

period of use of 15 years or 150,000

miles, whichever occurs first, for all

exhaust, evaporative and refueling

emission requirements except for cold

CO standards and standards which are

applicable only at the time of

certification.

(c) Where intermediate useful life

exhaust emission standards are

Federal Register / Vol. 65, No. 28 / Thursday, February 10, 2000 / Rules and Regulations 6853

applicable, such standards are

applicable for five years or 50,000 miles,

whichever occurs first.

(d) Where cold CO standards are

applicable, the useful life requirement

for compliance with the cold CO

standard only, is 5 years or 50,000

miles, whichever occurs first.

(e) Where LDVs, LDT1s and LDT2s of

the 2003 or earlier model years are

certified to Tier 2 exhaust emission

standards for purposes of generating

early Tier 2 NOX credits, manufacturers

may certify those vehicles to full useful

lives of 100,000 miles in lieu of the

otherwise required 120,000 mile full

useful lives, as provided under

§ 86.1861–04(c)(4).

(f) For interim non-Tier 2 LDV/LLDTs,

the useful life requirement for exhaust,

evaporative and refueling emissions is

10 years or 100,000 miles, whichever

occurs first.

19. Section 86.1806–01 is amended

by:

a. revising paragraph (a);

b. adding paragraph (b)(8);

c. redesignating the text of paragraph

(d) after the paragraph heading as (d)(1);

and

d. adding paragraph (d)(2).

The revisions and additions read as

follows:

§ 86.1806–01 On-board diagnostics.

(a)(1) Except as provided by

paragraph (a)(2) of this section, all lightduty vehicles, light-duty trucks and

MDPVs must be equipped with an

onboard diagnostic (OBD) system

capable of monitoring, for each vehicle’s

useful life, all emission-related

powertrain systems or components. All

systems and components required to be

monitored by these regulations must be

evaluated periodically, but no less

frequently than once per Urban

Dynamometer Driving Schedule as

defined in Appendix I, paragraph (a), of

this part, or similar trip as approved by

the Administrator.

(2) Diesel fueled chassis-certified

MDPVs and engine-certified diesel

engines used in MDPVs, are subject to

the requirements of this section only if

the exhaust emission certification of the

applicable test group is being carried

across from a California configuration to

which California OBD–II requirements

are applicable.

(b) * * *

(8) For Tier 2 and interim non-Tier 2

hybrid electric vehicles (HEVs) only.

Unless added to HEVs in compliance

with other requirements of this section,

or unless otherwise approved by the

Administrator:

(i) The manufacturer must equip each

HEV with a maintenance indicator

consisting of a light that must activate

automatically by illuminating the first

time the minimum performance level is

observed for each battery system

component. Possible battery system

components requiring monitoring are:

battery water level, temperature control,

pressure control, and other parameters

critical for determining battery

condition.

(ii) The manufacturer must equip ‘‘offvehicle charge capable HEVs’’ with a

useful life indicator for the battery

system consisting of a light that must

illuminate the first time the battery

system is unable to achieve an allelectric operating range (starting from a

full state-of-charge) which is at least 75

percent of the range determined for the

vehicle in the Urban Driving Schedule

portion of the All-Electric Range Test

(see the California Exhaust Emission

Standards and Test Procedures for 2003

and Subsequent Model Zero-Emission

Vehicles, and 2001 and Subsequent

Model Hybrid Electric Vehicles, in the

Passenger Car, Light-Duty Truck and

Medium-Duty Vehicle Classes. These

requirements are incorporated by

reference (see § 86.1).

(iii) The manufacturer must equip

each HEV with a separate odometer or

other device subject to the approval of

the Administrator that can accurately

measure the mileage accumulation on

the engines used in these vehicles.

* * * * *

(d) MIL illumination. (1) * * *

(2)(i) For interim non-Tier 2 and Tier

2 LDV/LLDTs and HLDT/MDPVs,

vehicles produced through the 2007

model year, upon a manufacturer’s

written request, EPA will consider

allowing the use of an on-board

diagnostic system during the

certification process, that functions

properly on low-sulfur gasoline, but

indicates sulfur-induced passes when

exposed to high sulfur gasoline.

(ii) For interim non-Tier 2 and Tier 2

LDV/LLDTs and HLDT/MDPVs, if

vehicles produced through the 2007

model year exhibit illuminations of the

emission control diagnostic system

malfunction indicator light due to high

sulfur gasoline, EPA will consider, upon

a manufacturer’s written request,

allowing modifications to such vehicles

on a case-by-case basis so as to

eliminate the sulfur induced

illumination.

* * * * *

20. Section 86.1807–01 is amended by

revising paragraph (a)(3)(vi) to read as

follows:

§ 86.1807–01 Vehicle labeling.

(a) * * *

(3) * * *

(vi) The exhaust emission standards

to which the test group is certified, and

for test groups having different in-use

standards, the corresponding exhaust

emission standards that the test group

must meet in use. In lieu of this

requirement, manufacturers may use the

standardized test group name

designated by EPA;

* * * * *

21. Section 86.1809–01 is amended by

adding paragraph (e) to read as follows:

§ 86.1809–01 Prohibition of defeat devices.

* * * * *

(e) For each test group of Tier 2 LDV/

LLDTs and HLDT/MDPVs and interim

non-Tier 2 LDV/LLDTs and HLDT/

MDPVs the manufacturer must submit,

with the Part II certification application,

an engineering evaluation

demonstrating to the satisfaction of the

Administrator that a discontinuity in

emissions of non-methane organic gases,

carbon monoxide, oxides of nitrogen

and formaldehyde measured on the

Federal Test Procedure (subpart B of

this part) does not occur in the

temperature range of 20 to 86 degrees F.

For diesel vehicles, the engineering

evaluation must also include particulate

emissions.

22. Section 86.1810–01 is amended

by:

a. adding two new sentences to the

end of the introductory text;

b. adding one new sentence to the end

of paragraph (f);

c. adding a new sentence to the end

of paragraph (i)(6); and

d. adding new paragraphs (i)(13),

(i)(14), (o) and (p).

The additions read as follows:

§ 86.1810–01 General standards; increase

in emissions; unsafe conditions; waivers.

* * * For Tier 2 and interim non-Tier

2 vehicles, this section also applies to

hybrid electric vehicles and zero

emission vehicles. Unless otherwise

specified, requirements and provisions

of this subpart applicable to methanol

fueled vehicles are also applicable to

Tier 2 and interim non-Tier 2 ethanol

fueled vehicles.

* * * * *

(f) * * * Interim non-Tier 2 LDV/Ts

may be certified to applicable Tier 1

exhaust emission standards at high

altitude as set forth in §§ 86.1811–01,

86.1812–01, 86.1813–01, 86.1814–02

and 86.1815–02. Requirements to meet

emission standards at high altitude are

optional for interim non-Tier 2 MDPVs.

* * * * *

(i) * * *

(6) * * * For Tier 2 and interim nonTier 2 vehicles, this provision does not

6854 Federal Register / Vol. 65, No. 28 / Thursday, February 10, 2000 / Rules and Regulations

apply to enrichment that occurs upon

cold start, warm-up conditions and

rapid-throttle motion conditions (‘‘tipin’’ or ‘‘tip-out’’ conditions).

* * * * *

(13) A/C-on specific calibrations. (i)

For Tier 2 and interim non-Tier 2

vehicles, A/C-on specific calibrations

(e.g. air to fuel ratio, spark timing, and

exhaust gas recirculation), may be used

which differ from A/C-off calibrations

for given engine operating conditions

(e.g., engine speed, manifold pressure,

coolant temperature, air charge

temperature, and any other parameters).

(ii) Such calibrations must not

unnecessarily reduce the NMHC+NOX

emission control effectiveness during A/

C-on operation when the vehicle is

operated under conditions which may

reasonably be expected to be

encountered during normal operation

and use.

(iii) If reductions in control system

NMHC+NOX effectiveness do occur as a

result of such calibrations, the

manufacturer must, in the Application

for Certification, specify the

circumstances under which such

reductions do occur, and the reason for

the use of such calibrations resulting in

such reductions in control system

effectiveness.

(iv) A/C-on specific ‘‘open-loop’’ or

‘‘commanded enrichment’’ air-fuel

enrichment strategies (as defined

below), which differ from A/C-off

‘‘open-loop’’ or ‘‘commanded

enrichment’’ air-fuel enrichment

strategies, may not be used, with the

following exceptions: Cold-start and

warm-up conditions, or, subject to

Administrator approval, conditions

requiring the protection of the vehicle,

occupants, engine, or emission control

hardware. Other than these exceptions,

such strategies which are invoked based

on manifold pressure, engine speed,

throttle position, or other engine

parameters must use the same engine

parameter criteria for the invoking of

this air-fuel enrichment strategy and the

same degree of enrichment regardless of

whether the A/C is on or off. ‘‘Openloop’’ or ‘‘commanded’’ air-fuel

enrichment strategy is defined as

enrichment of the air to fuel ratio

beyond stoichiometry for the purposes

of increasing engine power output and

the protection of engine or emissions

control hardware. However, ‘‘closedloop biasing,’’ defined as small changes

in the air-fuel ratio for the purposes of

optimizing vehicle emissions or

driveability, must not be considered an

‘‘open-loop’’ or ‘‘commanded’’ air-fuel

enrichment strategy. In addition,

‘‘transient’’ air-fuel enrichment strategy

(or ‘‘tip-in’’ and ‘‘tip-out’’ enrichment),

defined as the temporary use of an airfuel ratio rich of stoichiometry at the

beginning or duration of rapid throttle

motion, must not be considered an

‘‘open-loop’’ or ‘‘commanded’’ air-fuel

enrichment strategy.

(14) ‘‘Lean-on-cruise’’ calibration

strategies. (i) For Tier 2 and interim

non-Tier 2 vehicles, the manufacturer

must state in the Application for

Certification whether any ‘‘lean-oncruise’’ strategies are incorporated into

the vehicle design. A ‘‘lean-on-cruise’’

air-fuel calibration strategy is defined as

the use of an air-fuel ratio significantly

greater than stoichiometry, during nondeceleration conditions at speeds above

40 mph. ‘‘Lean-on-cruise’’ air-fuel

calibration strategies must not be

employed during vehicle operation in

normal driving conditions, including A/

C usage, unless at least one of the

following conditions is met:

(A) Such strategies are substantially

employed during the FTP or SFTP;

(B) Such strategies are demonstrated

not to significantly reduce vehicle

NMHC+NOX emission control

effectiveness over the operating

conditions in which they are employed;

or

(C) Such strategies are demonstrated

to be necessary to protect the vehicle

occupants, engine, or emission control

hardware.

(ii) If the manufacturer proposes to

use a ‘‘lean-on-cruise’’ calibration

strategy, the manufacturer must specify

the circumstances under which such a

calibration would be used, and the

reason or reasons for the proposed use

of such a calibration.

* * * * *

(o) Unless otherwise approved by the

Administrator, manufacturers must

measure NMOG emissions in

accordance with the California NonMethane Organic Gas Test Procedures.

These procedures are incorporated by

reference (see § 86.1).

(p) For gasoline and diesel-fueled Tier

2 and interim non-Tier 2 vehicles,

manufacturers may measure nonmethane hydrocarbons (NMHC) in lieu

of NMOG. Manufacturers must multiply

NMHC measurements from gasoline

vehicles by an adjustment factor of 1.04

before comparing with the NMOG

standard to determine compliance with

that standard. Manufacturers may use

other factors to adjust NMHC results to

more properly represent NMOG results.

Such factors must be based upon

comparative testing of NMOG and

NMHC emissions and be approved in

advance by the Administrator.

23. Section 86.1811–01 is amended by

adding a sentence to the end of the

introductory text to read as follows:

§ 86.1811–01 Emission standards for lightduty vehicles.

* * * This section does not apply to

2004 and later model year vehicles,

except as specifically referenced by

§ 86.1811–04.

* * * * *

24. Section 86.1811–04 is added to

read as follows:

§ 86.1811–04 Emission standards for lightduty vehicles, light-duty trucks and

medium-duty passenger vehicles.

(a) Applicability. (1) This section

contains regulations implementing

emission standards for all LDVs, LDTs

and MDPVs. This section applies to

2004 and later model year LDVs, LDTs

and MDPVs fueled by gasoline, diesel,

methanol, ethanol, natural gas and

liquefied petroleum gas fuels, except as

noted. Additionally, this section

contains provisions applicable to hybrid

electric vehicles (HEVs) and zero

emission vehicles (ZEVs). Multi-fueled

vehicles must comply with all

requirements established for each

consumed fuel.

(2) This section also applies to LDVs,

LDTs and MDPVs of model years prior

to 2004, when manufacturers certify

such vehicles to Tier 2 exhaust emission

requirements to utilize alternate phasein schedules, as allowed under

paragraph (k)(6) of this section, and/or

to earn early NOX credits for use in

complying with the Tier 2 fleet average

NOX standard which takes effect in the

2004 model year for LDV/LLDTs and

2008 for HLDT/MDPVs.

(3) Except where otherwise specified,

this section applies instead of

§§ 86.1811–01, 86.1812–01, 86.1813–01,

86.1814–01, 86.1814–02, 86.1815–01,

and 86.1815–02.

(4) Except where otherwise specified,

the provisions of this section apply

equally to LDVs and all categories of

LDTs, and to all MDPVs. Numerous

provisions are applicable equally to

HLDTs and MDPVs, as reflected by the

term HLDT/MDPV. Numerous

provisions apply equally to LDVs and

LLDTs as reflected by the term LDV/

LLDT.

(5) The exhaust emission standards

and evaporative emission standards of

this section apply equally to

certification and in-use LDVs, LDTs and

MDPVs, unless otherwise specified.

(b) Test weight. (1) Except as required

in paragraphs (b)(2) and (b)(4) of this

section, or permitted under paragraph

(b)(3) of this section, emission testing of

all LDVs, LDTs and MDPVs to

Federal Register / Vol. 65, No. 28 / Thursday, February 10, 2000 / Rules and Regulations 6855

determine compliance with any exhaust

or evaporative emission standard set

forth in this Part must be on a loaded

vehicle weight (LVW) basis, as that term

is defined in this subpart.

(2) Interim non-Tier 2 HLDTs tested to

Tier 1 SFTP standards, must be tested

on an adjusted loaded vehicle weight

(ALVW) basis, as that term is defined in

this subpart, during the SC03 element of

the SFTP.

(3) Except as required in paragraphs

(b)(2) and (b)(4) of this section, interim

non-Tier 2 HLDT/MDPVs may be tested

on an ALVW basis or an LVW basis to

demonstrate compliance with any

exhaust or evaporative emission

standard set forth in this Part.

(4) MDPVs certified to bin 11

standards from Tables S04–1 and –2

must be tested on an ALVW basis to

demonstrate compliance with any

exhaust emission standard set forth in

this part.

(c) Tier 2 FTP exhaust emission

standards. Exhaust emissions from Tier

2 vehicles must not exceed the

standards in Table S04–1 of this section

at full useful life when tested over the

Federal Test Procedure (FTP) described

in subpart B of this part. Exhaust

emissions from Tier 2 vehicles must not

exceed the standards in Table S04–2 of

this section at intermediate useful life,

if applicable, when tested over the FTP.

(1) For a given test group a

manufacturer desires to certify to

operate only on one fuel, the

manufacturer must select a set of

standards from the same bin (line or

row) in Table S04–1 of this section for

non-methane organic gases (NMOG),

carbon monoxide (CO), oxides of

nitrogen (NOX), formaldehyde (HCHO)

and particulate matter (PM). The

manufacturer must certify the test group

to meet those standards, subject to all

the applicable provisions of this

subpart. The manufacturer must also

certify the test group to meet the

intermediate useful life standards (if

any) in Table S04–2 of this section

having the same EPA bin reference

number as the chosen full useful life

standards.

(2) For a given test group of flexiblefueled, bi-fuel or dual fuel vehicles

when operated on the alcohol or

gaseous fuel they are designed to use,

manufacturers must select a bin of

standards from Table S04–1 of this

section and the corresponding bin in

Table S04–2, if any. When these

flexible-fueled, bi-fuel or dual fuel

vehicles are certified to operate on

gasoline or diesel fuel, the manufacturer

may choose to comply with the next

numerically higher applicable NMOG

standard, if any, above the bin which

contains the standards selected for

certification on the gaseous or alcohol

fuel.

(3)(i) For a given test group of flexiblefueled, bi-fuel or dual fuel vehicles

certified to bin 10 in Table S04–1, when

operated on the alcohol or gaseous fuel

they are designed to use, manufacturers

may choose to comply with a NMOG

standard of 0.230 for LDV/LLDTs or

0.280 g/mi for HLDT/MDPVs at full

useful life and corresponding

intermediate life standards of 0.160 g/mi

and 0.195 g/mi, respectively.

(ii) For a given test group of flexiblefueled, bi-fuel or dual fuel vehicles

certified to bin 8 in Table S04–1, when

operated on the alcohol or gaseous fuel

they are designed to use, manufacturers

may choose to comply with a NMOG

standard of 0.156 g/mi for LDV/LLDTs

and 0.180 for HLDT/MDPVs at full

useful life and corresponding

intermediate life standards of 0.125 g/mi

and 0.140 g/mi, respectively.

(4)(i) For bins where intermediate life

standards are applicable, a manufacturer

may elect not to comply with such

standards. Except as permitted in

paragraph (c)(4)(iv) of this section, the

manufacturer must certify such vehicles

to a useful life of 15 years or 150,000

miles, whichever occurs first, for LDV/

LLDTs and HLDT/MDPVs.

(ii) A manufacturer electing not to

comply with intermediate life

standards, as permitted in paragraph

(c)(4)(i) of this section, may not generate

additional NOX credits as described

under § 86.1860–04 (g), except as

permitted in paragraph (c)(4)(iii) of this

section.

(iii) For bins where intermediate life

standards are not applicable, or are

specified to be optional by paragraph

(c)(4)(iv) of this section, a manufacturer

may generate additional NOX credits

subject to the provisions in § 86.1860–

04 (g).

(iv) For diesel vehicles certified to bin

10, intermediate life standards are

optional regardless of whether the

manufacturer certifies the test group to

a full useful life of 120,000 miles or

150,000 miles.

(5) In a given model year, an

individual vehicle may not be included

in both the Tier 2 program and an

interim program.

(6) Tables S04–1 and S04–2 follow:

TABLE S04–1.—TIER 2 AND INTERIM NON-TIER 2 FULL USEFUL LIFE EXHAUST MASS EMISSION STANDARDS

[Grams per mile]

Bin No. NOX NMOG CO HCHO PM Notes

11 ................................................................................. 0.9 0.280 7.3 0.032 0.12 a, c

10 ................................................................................. 0.6 0.156/0.230 4.2/6.4 0.018/0.027 0.08 a, b, d

9 ................................................................................... 0.3 0.090/0.180 4.2 0.018 0.06 a, b, e

8 ................................................................................... 0.20 0.125/0.156 4.2 0.018 0.02 b, f

7 ................................................................................... 0.15 0.090 4.2 0.018 0.02

6 ................................................................................... 0.10 0.090 4.2 0.018 0.01

5 ................................................................................... 0.07 0.090 4.2 0.018 0.01

4 ................................................................................... 0.04 0.070 2.1 0.011 0.01

3 ................................................................................... 0.03 0.055 2.1 0.011 0.01

2 ................................................................................... 0.02 0.010 2.1 0.004 0.01

1 ................................................................................... 0.00 0.000 0.0 0.000 0.00

Notes:

aThis bin and its corresponding intermediate life bin are deleted at end of 2006 model year (end of 2008 model year for HLDTs and MDPVs). b Higher NMOG, CO and HCHO values apply for HLDTs and MDPVs only.

cThis bin is only for MDPVs.

dOptional NMOG standard of 0.280 g/mi applies for qualifying LDT4s and qualifying MDPVs only.

eOptional NMOG standard of 0.130 g/mi applies for qualifying LDT2s only.

f Higher NMOG standard deleted at end of 2008 model year.

6856 Federal Register / Vol. 65, No. 28 / Thursday, February 10, 2000 / Rules and Regulations

TABLE S04–2.—TIER 2 AND INTERIM NON-TIER 2 INTERMEDIATE USEFUL LIFE (50,000 MILE) EXHAUST MASS EMISSION

STANDARDS

[grams per mile]

Bin No. NOX NMOG CO HCHO PM Notes

11 ................................................................................. 0.6 0.195 5.0 0.022 acfh

10 ................................................................................. 0.4 0.125/0.160 3.4/4.4 0.015/0.018 .................... abdfgh

9 ................................................................................... 0.2 0.075/0.140 3.4 0.015 .................... abcfh

8 ................................................................................... 0.14 0.100/0.125 3.4 0.015 .................... bfhi

7 ................................................................................... 0.11 0.075 3.4 0.015 .................... f h

6 ................................................................................... 0.08 0.075 3.4 0.015 .................... f h

5 ................................................................................... 0.05 0.075 3.4 0.015 .................... f h

Notes:

aThis bin deleted at end of 2006 model year (end of 2008 model year for HLDTs and MDPVs ).

b Higher NMOG, CO and HCHO values apply for HLDTs and MDPVs only.

cThis bin is only for MDPVs.

dOptional NMOG standard of 0.195 g/mi applies for qualifying LDT4s and qualifying MDPVs only.

eOptional NMOG standard of 0.100 g/mi applies for qualifying LDT2s only.

fThe full useful life PM standards from Table S04–1 also apply at intermediate useful life.

g Intermediate life standards of this bin are optional for diesels.

h Intermediate life standards are optional for vehicles certified to a useful life of 150,000 miles.

i Higher NMOG standard deleted at end of 2008 model year.

(d) Fleet average NOX Standards.

(1)(i) For a given individual model

year’s sales of Tier 2 vehicles, including

model years during the phase-in years of

the Tier 2 standards, manufacturers

must comply with a fleet average oxides

of nitrogen (NOX) standard of 0.07

grams per mile. The manufacturer must

calculate its fleet average NOX emission

level(s) as described in § 86.1860–04.

Up through and including model year

2008, manufacturers must calculate

separate fleet average NOX emission

levels for LDV/LLDTs and for HLDT/

MDPVs as described in § 86.1860–04.

(ii) During a phase-in year, the

manufacturer must comply with the

0.07 g/mi fleet average standard for the

required phase-in percentage for that

year as specified in paragraph (k)(1) of

this section, or for the alternate phasein percentage as permitted under

paragraph (k)(6) of this section.

(2) For Early Tier 2 LDV/LLDTs. For

model years prior to 2004, where the

manufacturer desires to bank early Tier

2 NOX credits as permitted under

§ 86.1861(c), the manufacturer must

comply with a fleet average standard of

0.07 grams per mile for its Tier 2 LDV/

LLDTs. Manufacturers must determine

compliance with the NOX fleet average

standard according to regulations in

§ 86.1860–04 of this subpart.

(3) For Early Tier 2 HLDT/MDPVs. For

model years prior to 2008, where the

manufacturer desires to bank early Tier

2 NOX credits as permitted under

§ 86.1861(c), the manufacturer must

comply with a fleet average standard of

0.07 grams per mile for its Tier 2 HLDT/

MDPVs. Manufacturers must determine

compliance with the NOX fleet average

standard according to regulations in

§ 86.1860–04.

(e) Evaporative emission standards.

Consistent with the phase-in

requirements in paragraph (k) of this

section, evaporative emissions from

gasoline-fueled, natural gas-fueled,

liquefied petroleum gas-fueled, ethanolfueled and methanol-fueled vehicles

must not exceed the standards in this

paragraph. The standards apply equally

to certification and in-use vehicles,

except that the spitback standard

applies only to newly assembled

vehicles.

(1) Diurnal-plus-hot soak evaporative

hydrocarbon standards. Hydrocarbons

for LDV/LLDTs, HLDTs and MDPVs

must not exceed the diurnal plus hot

soak standards shown in Table S04–3

for the full three diurnal test sequence

and for the supplemental two diurnal

test sequence. Table S04–3 follows:

TABLE S04–3.—LIGHT-DUTY DIURNAL

PLUS HOT SOAK EVAPORATIVE

EMISSION STANDARDS

[grams per test]

Vehicle category

3 day

diurnal+hot

soak

Supplemental 2

day

diurnal+hot

soak

LDV/LLDTs ......... 0.95 1.2

HLDTs ................ 1.2 1.5

MDPVs ............... 1.4 1.75

(2) Running loss standard.

Hydrocarbons for LDVs, LDTs and

MDPVs measured on the running loss

test must not exceed 0.05 grams per

mile.

(3) Refueling emission standards.

Refueling emissions must not exceed

the following standards:

(i) For gasoline-fueled, diesel-fueled

and methanol-fueled LDVs, LDTs and

MDPVs: 0.20 grams hydrocarbon per

gallon (0.053 grams per liter) of fuel

dispensed.

(ii) For liquefied petroleum gas-fueled

LDV, LDTs and MDPVs: 0.15 grams

hydrocarbon per gallon (0.04 grams per

liter) of fuel dispensed.

(iii) Refueling standards for HLDTs

are subject to the phase-in requirements

found in § 86.1810–01(k). MDPVs must

also comply with the phase-in

requirement in § 86.1810–01(k) and

must be grouped with HLDTs to

determine phase-in compliance.

(4) Spitback standards. For gasoline

and methanol fueled LDV/Ts and

MDPVs, hydrocarbons measured on the

fuel dispensing spitback test must not

exceed 1.0 grams hydrocarbon (carbon if

methanol-fueled) per test.

(5) Evaporative emission requirements

for interim vehicles. (i) LDV/Ts not

certified to meet the evaporative

emission standards in this paragraph (e)

as permitted under the phase-in

schedule of paragraph (k) of this section,

must meet applicable evaporative

emission standards in §§ 86.1811–01,

86.1812–01, 86.1813–01, 86.1814–02 or

86.1815–02 except that all LDV/Ts must

meet the refueling emission standards in

paragraph (e)(3) of this section.

(ii) MDPVs not certified to meet the

evaporative emission standards in this

paragraph (e) as permitted under the

phase-in schedule of paragraph (k) of

this section, must meet applicable

evaporative emission standards for

heavy-duty vehicles in § 86.099–10.

(6) In cases where applicable

California emission standards are as

stringent or more stringent than

applicable standards specified under

this paragraph (e), the Administrator

may accept data indicating compliance

with California standards to

Federal Register / Vol. 65, No. 28 / Thursday, February 10, 2000 / Rules and Regulations 6857

demonstrate compliance for certification

purposes with the standards required

under this paragraph (e). The

Administrator may require

manufacturers to provide comparative

test data to show that a vehicle meeting

California standards under California

test conditions and procedures will also

meet the standards under this paragraph

(e) when tested under test conditions

and procedures in this Part 86.

(f) Supplemental exhaust emission

standards for LDV/Ts. (1) Supplemental

exhaust emission standards are

applicable to gasoline and diesel-fueled

LDV/Ts but are not applicable to

MDPVs, alternative fueled LDV/Ts, or

flexible fueled LDV/Ts when operated

on a fuel other than gasoline or diesel.

Except as otherwise specified in this

paragraph (f), manufacturers must

comply with 4000 mile and full useful

life SFTP standards as determined in

this paragraph (f). The 4000 mile SFTP

standards must be taken from Table

S04–4 and the full life SFTP standards

must be calculated using the formula in

paragraph (f)(2) of this section. Table

S04–4 follows:

TABLE S04–4.—4000 MILE SFTP STANDARDS FOR TIER 2 AND INTERIM NON-TIER 2 LDVS AND LDTS

US06 SC03

NMHC+NOX

(g/mi) CO (g/mi) NMHC+NOX(g/mi) CO (g/mi)

LDV/LDT1 ..................................................................................................................... 0.14 8.0 0.20 2.7

LDT2 ............................................................................................................................. 0.25 10.5 0.27 3.5

LDT3 ............................................................................................................................. 0.4 10.5 0.31 3.5

LDT4 ............................................................................................................................. 0.6 11.8 0.44 4.0

(2)(i) Manufacturers must calculate

their applicable full useful life SFTP

standards for NMHC+NOX, PM and for

CO, if using the weighted CO standard.

If not using the weighted CO standard,

manufacturers may use the full useful

life standalone Tier 1 standards for

US06 and SC03. To calculate the

applicable full useful life weighted

NMHC+NOX, PM and CO standards,

manufacturers must use the following

formula and values from Table S04–1 in

paragraph (c) of this section and values

from Tables S04–5 and S04–6 which

follow:

SFTP Standard = SFTP Standard1 ¥

[0.35 x (FTP Standard1—Current FTP

Standard)]

Where:

SFTP Standard = Applicable full life

weighted SFTP standard for

NMHC+NOX, PM or CO. This

standard must be rounded to two

decimal places.

SFTP Standard1 = Applicable full life

Tier 1 SFTP standard for NMHC+NOX

or CO from Table S04–5. For PM only,

use FTP Standard1 for SFTP

Standard1.

FTP Standard1 = Applicable full life

Tier 1 FTP standard from Table S04–

6 in this paragraph (f). For the Tier 1

NMHC+NOX standard, add the

applicable NMHC and NOx standards.

Current FTP Standard = Applicable full

life FTP standard from Table S04–1 in

paragraph (c) of this section. For the

current NMHC+NOX standard, add

the NMOG and NOX standards from

the applicable bin.

TABLE S04–5.—TIER 1 FULL USEFUL LIFE SFTP STANDARDS

Vehicle category

NMHC + NOX

(weighted

g/mi)a, c

CO (g/mi)b, c

US06 SC03 Weighted

LDV/LDT1 ........................................................................................................ 0.91 (0.65) 11.1 (9.0) 3.7 (3.0) 4.2 (3.4)

LDT2 ................................................................................................................ 1.37 (1.02) 14.6 (11.6) 4.9 (3.9) 5.5 (4.4)

LDT3 ................................................................................................................ 1.44 16.9 5.6 6.4

LDT4 ................................................................................................................ 2.09 19.3 6.4 7.3

aWeighting for NMHC+NOX and optional weighting for CO is 0.35x(FTP) +0.28x(US06)+0.37x(SC03). b CO standards are stand alone for US06 and SC03 with option for a weighted standard.

c Intermediate life standards are shown in parentheses for diesel LDV/LLDTs opting to calculate intermediate life SFTP standards in lieu of

4,000 mile SFTP standards as permitted under paragraph (f)(6) of this section.

TABLE S04–6.—TIER 1 FULL USEFUL LIFE FTP STANDARDS (G/MI)

Vehicle category NMHC a NOXa CO a PM

LDV/LDT1 ........................................................................................................ 0.31 (0.25) 0.6 (0.4) 4.2 (3.4) 0.10

LDT2 ................................................................................................................ 0.40 (0.32) 0.97(0.7) 5.5 (4.4) 0.10

LDT3 ................................................................................................................ 0.46 0.98 6.4 0.10

LDT4 ................................................................................................................ 0.56 1.53 7.3 0.12

a Intermediate life standards are shown in parentheses for diesel LDV/LLDTs opting to calculate intermediate life SFTP standards in lieu of

4,000 mile SFTP standards as permitted under paragraph (f)(6)of this section.

(ii)(A) Manufacturers must determine

compliance with NMHC+NOX, CO and

PM weighted SFTP standards calculated

in paragraph (f)(2)(i) of this section by

weighting their emission results as

follows:

0.35×(FTP)+0.28×(US06)+0.37×(SC03).

(B) The results of the calculation in

paragraph (f)(2)(ii)(A) of this section

must be rounded to one more decimal

place than the applicable standard

calculated in paragraph (f)(2)(i) of this

section and then compared with that

standard.

6858 Federal Register / Vol. 65, No. 28 / Thursday, February 10, 2000 / Rules and Regulations

(3) For interim non-Tier 2 gasoline,

diesel and flexible-fueled LDT3s and

LDT4s, manufacturers may,

alternatively, meet the gasoline-fueled

vehicle SFTP standards found in

§§ 86.1814–02 and 86.1815–02,

respectively.

(4) Interim non-Tier 2 gasoline, diesel

and flexible-fueled LDV/LLDTs certified

to bin 10 FTP exhaust emission

standards from Table S04–1 in

paragraph (c) of this section may meet

the gasoline Tier 1 SFTP requirements

found at § 86.1811–01(b).

(5) SFTP standards for PM are not

applicable to interim non-Tier 2 LDV/

Ts. For Tier 2 LDV/Ts, the 4000 mile

PM standard is equal to the full life PM

standard calculated under paragraph

(f)(2) of this section. The requirements

of this paragraph (f)(5) also apply to Tier

2 flexible fuel vehicles when operated

on gasoline or diesel fuel. (See

regulations in § 86.1829-01(b)(1)(iii)(B)

regarding data submittal for PM results

for gasoline vehicles.)

(6)(i) In lieu of complying with 4000

mile SFTP standards described in this

paragraph, diesel LDV/LLDTs through

model year 2006, may comply instead

with intermediate life SFTP standards

derived from Tier 1 intermediate life

SFTP standards for gasoline vehicles.

(ii) To calculate intermediate life

SFTP standards, substitute intermediate

life Tier 1 FTP and SFTP values from

Tables S04–5 and S04–6 in this

paragraph (f), as appropriate, for the full

life values in the equation in paragraph

(f)(2)(i) of this section. Substitute the

applicable intermediate life standards

for the full life current FTP standard. If

there is no applicable intermediate life

standard use the full life current FTP

standard.

(iii) A manufacturer of diesel LDV/

LLDTs must declare which option it

will use (4,000 mile or intermediate life

standards) in Part I of its certification

application.

(g) Cold temperature exhaust

emission standards. These standards are

applicable only to gasoline fueled LDV/

Ts and MDPVs. For cold temperature

exhaust emission standards, a useful life

of 50,000 miles applies.

(1) For LDVs and LDT1s, the standard

is 10.0 grams per mile CO.

(2) For LDT2s, LDT3s and LDT4s, and

MDPVs the standard is 12.5 grams per

mile CO.

(3) These standards do not apply to

interim non-Tier 2 MDPVs.

(h) Certification short test exhaust

emission standards. Certification short

test emissions from all gasoline-fueled

otto cycle LDV/Ts and MDPVs must not

exceed the following standards:

(1) Hydrocarbons: 100 ppm as hexane,

for certification and SEA testing; 220

ppm as hexane, for in-use testing.

(2) Carbon monoxide: 0.5% for

certification and SEA testing; 1.2% for

in-use testing.

(3) These standards do not apply to

interim non-Tier 2 MDPVs.

(i) Idle CO standards and references to

such standards in this subpart, do not

apply to any 2004 or later model year

LDV, LDT, or MDPV or to any LDV, LDT

or MDPV certified to Tier 2 standards

before model year 2004 for purposes of

generating early NOX credits or meeting

the requirements of an alternative

phase-in schedule that begins prior to

the 2004 model year.

(j) Highway NOX exhaust emission

standard. The maximum projected NOX

emissions measured on the federal

Highway Fuel Economy Test in 40 CFR

part 600, subpart B, must not be greater

than 1.33 times the applicable FTP NOX

standard to which the manufacturer

certifies the test group. Both the

projected emissions and the product of

the NOX standard and 1.33 must be

rounded to the nearest 0.01 g/mi before

being compared. This standard is not

applicable to MDPVs.

(k) Phase-in of the Tier 2 FTP exhaust

and evaporative requirements; small

volume manufacturer flexibilities. (1)

Manufacturers must comply with the

phase-in requirements in Tables S04–7

and S04–8 of this paragraph (k) for the

Tier 2 FTP exhaust emission

requirements specified in paragraph (c)

of this section. Separate phase-in

schedules are provided for LDV/LLDTs

and for HLDT/MDPVs. These

requirements specify the minimum

percentage of the manufacturer’s LDV/

LLDT and HLDT/MDPV U.S. sales, by

model year, that must meet the Tier 2

requirements, including the applicable

fleet average standard, for their full

useful lives. As the terms LDV/LLDT

and HLDT/MDVP imply, LDVs and

LLDTs must be grouped together to

determine compliance with these phasein requirements and HLDTs and MDPVs

must also be grouped together to

determine compliance with these phasein requirements. Tables S04–7 and S04–

8 follow:

TABLE S04–7.—PHASE-IN PERCENTAGES FOR LDV/LLDT TIER 2 REQUIREMENTS

Model year

Percentage

of LDV/

LLDTs that

must meet

tier 2 requirements

2004 .......................................... 25

TABLE S04–7.—PHASE-IN PERCENTAGES FOR LDV/LLDT TIER 2 REQUIREMENTS—Continued

Model year

Percentage

of LDV/

LLDTs that

must meet

tier 2 requirements

2005 .......................................... 50

2006 .......................................... 75

2007 and subsequent ............... 100

TABLE S04–8.—PHASE-IN PERCENTAGES FOR HLDT/MDPV TIER 2 REQUIREMENTS

ModeL year

Percentage of

HLDT/MDPVs

that must meet

tier 2 requirements

2008 ...................................... 50

2009 and subsequent ........... 100

(2) Manufacturers must also comply

with the phase-in requirements in

Tables S04–7 and S04–8 of this

paragraph (k) for the evaporative

emission requirements contained in

paragraph (e) of this section.

(3) Manufacturers may opt to use

different LDV/LLDTs and HLDT/MDPVs

to meet the phase-in requirements for

evaporative emissions and FTP exhaust

emissions, provided that the

manufacturer meets the minimum

applicable phase-in requirements in

Table S04–7 and Table S04–8 of this

paragraph (k) for both FTP exhaust and

evaporative emissions. A LDV, LDT or

MDPV counted toward compliance with

any phase-in requirement for FTP

exhaust or evaporative standards, must

comply with all applicable Tier 2

exhaust requirements or all applicable

evaporative requirements, respectively,

described in this section.

(4) LDVs, LDTs and MDPVs not

certified to meet the Tier 2 FTP exhaust

requirements during model years 2004–

2008, as allowed under this subpart, are

subject to the provisions of paragraph (l)

of this section.

(5) Provisions for small volume

manufacturers (i) Small volume

manufacturers, as defined in this part,

are exempt from the Tier 2 LDV/LLDT

exhaust and evaporative emissions

phase-in requirements for model years

2004, 2005 and 2006 in Table S04–7 of

this paragraph (k), but must comply

with the 100% requirement for the 2007

and later model years for exhaust and

evaporative emissions. If not complying

with Tier 2 requirements during 2004,

2005 and 2006, small volume

Federal Register / Vol. 65, No. 28 / Thursday, February 10, 2000 / Rules and Regulations 6859

manufacturers must comply with the

requirements for interim non-Tier 2

LDV/LLDTs.

(ii) Small volume manufacturers, as

defined in this part, are exempt from the

HLDT/MDPV exhaust and evaporative

phase-in requirement for model year

2008 in Table S04–8 of this section but

must comply with the 100%

requirement for the 2009 model year.

Small volume manufacturers are also

exempt from the HLDT/MDPV interim

fleet average NOX standard (0.20 g/mi)

and its phase-in for the 2004, 2005 and

2006 model years.

(iii) Small volume manufacturers

must comply with the FTP exhaust

emission standards from Tables S04–1

and 2 of paragraph (c) of this section for

all HLDT/MDPVs of model years 2004

and later, except that 2004 model year

HLDTs may comply with Tier 1 exhaust

emission standards subject to the

provisions of paragraph (l)(2)(vii) of this

section, and 2004 model year MDPVs

may comply with heavy-duty vehicle

standards subject to the provisions of

paragraph (l)(2)(viii) of this section.

Small volume manufacturers must also

comply with the 0.20 g/mi fleet average

NOX standard for 2007 and 2008 model

year HLDT/MDPVs; the Tier 2 0.07 g/mi

fleet average NOX standard for the 2009

and later model year HLDT/MDPVs; and

the evaporative emission standards in

Table S04–3 of this section for the 2009

and later model years.

(6)(i) A manufacturer may elect an

alternate phase-in schedule that results

in 100% phase-in for LDV/LLDTs by

2007. Alternate phase-in schedules must

produce a sum of at least 250% when

the percentages of LDV/LLDTs certified

to Tier 2 requirements for each model

year from 2001 through 2007 are

summed. As an example, a 10/25/50/65/

100 percent phase-in that began in 2003

would have a sum of 250 percent and

would be acceptable. However, a 10/25/

40/70/100 percent phase-in that began

the same year would have a sum of 245

percent and would not be acceptable.

(ii) A manufacturer electing this

option for LDV/LLDTs may calculate its

compliance with the evaporative

standards in paragraph (e)(1) of this

section separately from its compliance

with Tier 2 exhaust standards, provided

that the phase-in schedules for each

separately produce a sum of at least 250

percent when calculated as described in

paragraph (k)(6)(i) of this section. A

vehicle counted towards compliance

with any phase-in requirement for the

Tier 2 exhaust standards or the

evaporative standards in paragraph

(e)(1) of this section, must comply with

all applicable Tier 2 exhaust standards

or all evaporative standards, as

applicable, described in this section.

(iii) In addition to the requirements of

paragraphs (k)(6)(i) and (ii) of this

section, except as permitted in

paragraph (k)(6)(vii) of this section, a

manufacturer of LDV/LLDTs electing to

use an alternate phase-in schedule for

compliance with the Tier 2 exhaust

standards or the evaporative standards

in paragraph (e)(1) of this section must

ensure that the sum of the percentages

of vehicles from model years 2001

through 2004, meeting such exhaust or

evaporative standards, as applicable, is

at least 25%.

(iv) A manufacturer may elect an

alternate phase-in schedule that results

in 100% phase-in for HLDT/MDPVs by

2009. The requirements of paragraphs

(k)(6)(i) through (k)(6)(ii) of this section

apply, except that for HLDT/MDPVs, the

calculation described in paragraphs

(k)(6)(i) and (k)(6)(ii) of this section may

cover model years 2001 through 2009

and must produce a sum of at least

150%.

(v) A manufacturer electing to use any

alternate phase-in schedule permitted

under this section must provide in its

Application for Certification for the first

year in which it intends to use such a

schedule, and in each succeeding year

during the phase-in, the intended phasein percentages for that model year and

the remaining phase-in years along with

the intended final sum of those

percentages as described in this

paragraph (k)(6). This information may

be included with the information

required under § 86.1844–01(d)(13). In

its year end annual reports, as required

under § 86.1844–01(e)(4) the

manufacturer must include sufficient

information so that the Administrator

can verify compliance with the

alternative phase-in schedule

established under paragraph (k)(6) of

this section.

(vi) Under an alternate phase-in

schedule, the projected phase-in

percentage is not binding for a given

model year, provided the sums of the

actual phase-in percentages that occur

meet the appropriate total sums as

required in paragraph (k)(6) of this

section, and provided that 100% actual

compliance is reached for the

appropriate model year, either 2007 or

2009, as described in paragraph (k)(6) of

this section.

(vii) A manufacturer unable to meet

the 25% requirement in paragraph

(k)(6)(iii) of this section, must:

(A) Ensure that the sum of the

percentages of vehicles for model years

2001 through 2004, meeting such

exhaust or evaporative standards, as

applicable, is at least 20%.

(B) Subtract that sum of percentages

for model years 2001 through 2004 from

25%, and multiply the unrounded result

by 2.

(C) Round the product from paragraph

(k)(6)(vii)(B) of this section to the

nearest 0.1% and add that to 50%. That

sum becomes the required phase-in

percentage for the 2005 model year.

(D) Comply with the phase-in

percentage for the 2005 model year

determined in paragraph (k)(6)(vii)(C) of

this section.

(E) Comply with a minimum phase-in

percentage for the 2006 model year

determined by the following equation:

minimum phase-in percentage for 2006

= [75% ¥ (2005api ¥ 2005rpi)]

Where:

2005rpi = the required phase-in for the

2005 model year as determined in

paragraph (k)(6)(vii)(C) of this

section; and

2005api = the manufacturer’s actual

phase-in quantity for the 2005

model year.

(7)(i) Sales percentages for the

purpose of determining compliance

with the phase-in of the Tier 2

requirements and the phase-in of the

evaporative standards in paragraph

(e)(1) of this section, must be based

upon projected U.S. sales of LDV/LLDTs

and HLDT/MDPVs of the applicable

model year by the manufacturer to the

point of first sale. Such sales

percentages must be rounded to the

nearest one tenth of a percent, and must

not include vehicles and trucks

projected to be sold to points of first sale

in California or a state that has adopted

California requirements for that model

year as permitted under section 177 of

the Act.

(ii) Alternatively, the manufacturer

may petition the Administrator to allow

actual volume produced for U.S. sales to

be used in lieu of projected U.S. sales

for purposes of determining compliance

with the phase-in percentage

requirements under this section. The

manufacturer must submit its petition

within 30 days of the end of the model

year to the Vehicle Programs and

Compliance Division. For EPA to

approve the use of actual volume

produced for U.S. sales, the

manufacturer must establish to the

satisfaction of the Administrator, that

actual production volume is

functionally equivalent to actual sales

volume of LDV/LLDTs and HLDT/

MDPVs sold in states other than

California and states that have adopted

California standards.

(iii) Manufacturers must submit

information showing compliance with

all phase-in requirements of this section

6860 Federal Register / Vol. 65, No. 28 / Thursday, February 10, 2000 / Rules and Regulations

with its Part I application as required by

§ 86.1844(d)(13).

(l) FTP exhaust standards for interim

non-Tier 2 vehicles.—(1) FTP exhaust

emission standards for interim non-Tier

2 LDV/LLDTs. (i) LDV/LLDTs that are

not used to meet the Tier 2 phase-in

requirements including the Tier 2 fleet

average NOX requirement during the

Tier 2 phase-in period (model years

2004–2006) must comply with the full

useful life FTP exhaust emission

standards listed in Table S04–1 of

paragraph (c) of this section and the

corresponding intermediate useful life

standards, if any, in Table S04–2 of

paragraph (c) of this section.

Manufacturers may choose the bin of

full useful life standards to which they

certify a test group of vehicles, subject

to the requirements in paragraph (l)(3)(i)

of this section. In a given model year,

an individual vehicle may not be used

to comply with both the Tier 2 fleet

average NOX standard and the

applicable interim fleet average NOX

standard although vehicles from the

same test group may be separated and

the vehicles counted toward compliance

with either program.

(ii) The provisions of paragraphs (c)

(1), (2) and (3) of this section apply to

flexible-fueled, dual fuel and multi-fuel

interim non-Tier 2 LDV/LLDTs.

(iii) Only manufacturers that comply

with the applicable FTP standards in

Tables S04–1 and 2 of paragraph (c) of

this section for all of their 2004 model

year HLDTs and declare their intention

to comply with the 2004 model year

25% phase-in requirement to the 0.20 g/

mi interim fleet average NOX standard

for HLDTs (or HLDT/MDPVs) described

in this paragraph (l) may use the

optional higher NMOG values for

interim LDT2s certified to bin 9

standards that are shown in Tables S04–

1 and 2. Manufacturers must declare

their intention to comply with the full

2004 model year 25% phase-in

requirement in Part I of their HLDT or

their HLDT/MDPV, as applicable,

certification applications.

(iv) The provisions of paragraph (c)(4)

of this section apply to interim non-Tier

2 vehicles.

(2) FTP exhaust emission standards

for interim non-Tier 2 HLDTs and

interim non-Tier 2 MDPVs. (i) Except as

permitted under paragraphs (l)(2) (vii)

and (viii) of this section, HLDTs and

MDPVs of model years 2004–2008 that

are not used to meet the Tier 2 FTP

phase-in requirements including the

Tier 2 fleet average NOX requirement

must comply with the full useful life

FTP exhaust emission standards listed

in Table S04–1 of paragraph (c) of this

section and, the corresponding

intermediate useful life standards, if

any, in Table S04–2 of paragraph (c) of

this section. Manufacturers may choose

the bin of full useful life standards to

which they certify a test group of

vehicles, subject to the requirements in

paragraph (l)(3)(ii) of this section.

(ii) Except as permitted under

paragraphs (l)(2) (vii) and (viii) of this

section, HLDTs and MDPVs of model

years 2004–2008 that are not used to

meet the Tier 2 FTP phase-in

requirements including the Tier 2 fleet

average NOX requirement must comply

with the fleet average NOX standard

described in paragraph (l)(3)(ii) of this

section subject to the phase-in schedule

in paragraph (l)(2)(iv) of this section, i.e.

25 percent of the HLDT and MDPVs

must meet the fleet average standard of

0.20 g/mi in 2004, 50 percent in 2005,

and so on.

(iii) Manufacturers may choose the

bin of full useful life standards and

corresponding intermediate life

standards to which they certify test

groups of HLDTs and MDPVs, subject to

the requirements in paragraph (l)(3)(ii)

of this section. Manufacturers may

include HLDT/MDPVs in the interim

program that are not used to meet the

Tier 2 fleet average NOX standard or the

phase-in percentage requirements in the

Tier 2 program or to generate Tier 2

NOX credits. In a given model year, an

individual vehicle may not be used to

comply with both the Tier 2 fleet

average NOX standard and the

applicable interim fleet average NOX

standard although vehicles from the

same test group may be separated and

the vehicles counted toward compliance

with either program.

(iv) Phase-in schedule for interim

non-Tier 2 HLDT/MDPVs. Table S04–9

of this paragraph (l) specifies the

minimum percentage of the

manufacturer’s interim non-Tier 2

HLDT/MDPV U.S. sales, by model year,

that must comply with the fleet average

NOX standard described in paragraph

(l)(3)(ii) of this section. Table S04–9

follows:

Table S04–9.—Phase-in Percentages for Compliance With Interim

Non-Tier 2 Fleet Average NOX

Standard for HLDT/MDPVs

Model year

Percentage of

non-tier 2

HLDT/MDPVs

that must meet

interim non-tier

2 fleet average

NOX standard

2004 ...................................... 25

2005 ...................................... 50

2006 ...................................... 75

Table S04–9.—Phase-in Percentages for Compliance With Interim

Non-Tier 2 Fleet Average NOX

Standard for HLDT/MDPVs—Continued

Model year

Percentage of

non-tier 2

HLDT/MDPVs

that must meet

interim non-tier

2 fleet average

NOX standard

2007 and 2008 ..................... 100

(v)(A) A manufacturer may elect an

alternate phase-in schedule, beginning

as early as the 2001 model year, that

results in 100% compliance by 2007

with the fleet average NOX standard for

interim non-Tier 2 HLDT/MDPVs

described in paragraph (l)(3)(ii) of this

section. The requirements of paragraph

(k)(6) of this section apply to the

selection of an alternate phase-in

schedule.

(B) If a manufacturer elects not to

bring all of its HLDT/MDPVs into

compliance with the interim

requirements in 2004 as permitted

under paragraphs (l)(2)(vii) and

(viii) of this section, it may still use

an alternate phase-in schedule to attain

100% compliance with the interim fleet

average NOX standard for HLDT/

MDPVs, but the sum of phase-in

percentages it must meet will be 225%

rather than 250%. If the manufacturer

commences its 2004 model year on or

after December 21, 2003, for any HLDT/

MDPVs, the manufacturer must increase

the 225% by the fraction of its 2004

model year HLDT/MDPVs whose model

year commenced on or after that date

and which were brought into

compliance with the 0.20 g/mi corporate

average NOX standard as required under

paragraph (l)(2)(ix) of this section. The

manufacturer must ensure that the sum

of the percentages of vehicles up

through model year 2005 complying

with the interim fleet average NOX

standard is at least 50%.

(vi) The provisions of paragraphs (c)

(1), (2) and (3) of this section apply to

flexible-fueled, dual fuel and multi-fuel

interim non-Tier 2 HLDT/MDPVs.

(vii) For 2004 model year HLDT test

groups whose model year commences

before December 21, 2003, the

manufacturer may exempt such HLDTs

from compliance with any requirements

applicable to interim non-Tier 2 HLDTs,

and such HLDTs must be produced in

accordance with standards and

requirements in §§ 86.1814–02 and

§§ 86.1815–02. Such HLDTs must also

meet the refueling emission standards

Federal Register / Vol. 65, No. 28 / Thursday, February 10, 2000 / Rules and Regulations 6861

contained in paragraph (e)(3) of this

section.

(viii) For 2004 model year heavy-duty

vehicles whose model year commences

before December 21, 2003, the

manufacturer may exempt such vehicles

from compliance with any requirements

applicable to interim non-Tier 2

MDPVs. Exempted vehicles will not be

considered MDPVs and must be

produced in accordance with standards

and requirements in § 86.099–10.

Exempted vehicles are also exempted

from refueling emission standards.

(ix) For 2004 model year HLDT and

MDPV test groups whose model year

commences on or after December 21,

2003, the manufacturer must comply

with all interim non-Tier 2 requirements

in this section.

(A) All such vehicles, but not more

than 25% of the manufacturer’s total

sales of 2004 model year HLDT/MDPVs

must meet the interim non-Tier 2 fleet

average NOX standard as described in

paragraph (l)(3)(ii) of this section.

(B) All such vehicles but not more

than 40% of the manufacturer’s 2004

model year HLDT/MDPVs must comply

with the refueling requirements in

paragraph (e)(3) of this section.

(x) Only those manufacturers that

comply with the interim non-Tier 2 FTP

standards for all of their 2004 model

year HLDTs and declare their intention

to comply with the 2004 model year

25% phase-in requirement to the fleet

average interim NOX standard for

HLDTs or HLDT/MDPVs of 0.20 g/mi

described in paragraph (l) of this section

may use the optional higher NMOG

values for interim LDT4s certified to bin

10 standards that are shown in Tables

S04–1 and 2 of paragraph (c) of this

section. Manufacturers must declare

their intention to comply with the 2004

model year 25% phase-in requirement

in Part I of their HLDT certification

applications.

(xi) Only those manufacturers that

comply with the interim non-Tier 2 FTP

standards for all of their 2004 model

year MDPVs, and declare their intention

to comply with the 2004 model year

25% phase-in requirement to the fleet

average interim NOX standard for

MDPVs or HLDT/MDPVs of 0.20 g/mi

described in paragraph (l) of this section

may:

(A) Use the exhaust emission

standards of bin 11 in Tables S04–1 and

S04–2 of paragraph (c) in this section for

MDPVs through model year 2008;

(B) For diesel-fueled vehicles, certify

the engines in such vehicles, through

model year 2007, to provisions in this

part 86 applicable to diesel-fueled

heavy-duty engines of the appropriate

model year. Such diesel fueled vehicles

must not be included in any count or

determination of compliance with the

phase-in requirements applicable to

interim non-Tier 2 MDPVs; and

(C) Use the optional higher NMOG

values for interim LDT4s certified to bin

10 standards that are shown in Tables

S04–1 and 2.

(xii) Manufacturers electing to comply

with the provisions of paragraph

(l)(2)(xi) of this section must declare

their intention to comply with the 2004

model year 25% phase-in requirement

to the fleet average interim NOX

standard for MDPVs or HLDT/MDPVs of

0.20 g/mi in Part I of their MDPV

certification applications.

(xiii) Where diesel-fueled heavy-duty

engines are used as permitted under

paragraph (l)(2)(xi)(B) of this section,

such engines must be treated as a

separate averaging set—MDPV HDDEs—

under the averaging, banking and

trading provisions applicable to heavyduty diesel engines. Only NOX credits

generated by engine-certified diesel

engines that are used in other MDPVs

can be applied to these engines.

Manufacturers wishing to average, bank

or trade credits for MDPV HDDEs must

comply with the requirements in this

paragraph and with all requirements

applicable to heavy-duty engine

averaging, banking and trading in this

part.

(3) Fleet average NOX standards for

interim non-Tier 2 LDV/Ts and MDPVs.

(i) Manufacturers must comply with a

fleet average full useful life NOX

standard for their interim non-Tier 2

LDV/LLDTs, on an annual basis, of 0.30

grams per mile.

(ii) Manufacturers must comply with

a fleet average full useful life NOX

standard for their interim non-Tier 2

HLDT/MDPVs, excluding those HLDTs

and MDPVs not yet covered by the

phase-in requirement described in

paragraph (l)(2)(ii) of this section, on an

annual basis, of 0.20 grams per mile.

(iii) Manufacturers must determine

their compliance with these interim

fleet average NOX standards for each

model year by separately computing the

sales weighted average NOX level of all

interim non-Tier 2 LDV/LLDTs and all

interim non-Tier 2 HLDT/MDPVs

(excluding those not yet phased in as

described in paragraph (l)(2)(ii) of this

section), using the methodology in

§ 86.1860.

(iv) Manufacturers may generate,

bank, average, trade and use interim

non-Tier 2 NOX credits based on their

NOX fleet average as determined under

paragraph (l)(3)(iii) of this section.

Unless waived or modified by the

Administrator, the provisions of

§ 86.1861 of this part apply to the

generation, banking, averaging, trading

and use of credits generated by interim

non-Tier 2 vehicles. NOX credits

generated by interim non-Tier 2 vehicles

are not subject to any discount except as

required by § 86.1861–04(e).

(m) NMOG standards for diesel,

flexible fueled and dual-fueled LDV/Ts

and MDPVs. (1) For diesel fueled LDV/

Ts and MDPVs, the term ‘‘NMOG’’ in

both the Tier 2 and interim non-Tier 2

standards means non-methane

hydrocarbons.

(2) Flexible-fueled and dual-fuel Tier

2 and interim non-Tier 2 vehicles must

be certified to NMOG exhaust emission

standards both for operation on gasoline

and on any alternate fuel they are

designed to use. Manufacturers may

measure NMHC in lieu of NMOG when

flexible-fueled and dual-fuel vehicles

are operated on gasoline, subject to the

requirements of § 86.1810(p).

(n) Hybrid electric vehicle (HEV) and

Zero Emission Vehicle (ZEV)

requirements. For FTP and SFTP

exhaust emissions, and unless otherwise

approved by the Administrator,

manufacturers must measure emissions

from all HEVs and ZEVs according to

the requirements and test procedures

found in the document entitled

California Exhaust Emission Standards

and Test Procedures for 2003 and

Subsequent Model Zero-Emission

Vehicles and 2001 and Subsequent

Model Hybrid Electric Vehicles, in the

Passenger Car, Light-duty Truck and

Medium-duty Vehicle Classes. This

document is incorporated by reference

(see § 86.1) . Requirements and

procedures in this document that are

relevant only to complying with the

California ZEV mandate, computing

partial and full ZEV allowance credits,

or generating and using ZEV credits, are

not relevant to the federal program and

may be disregarded. Discussion in that

document relevant to fleet average

NMOG standards and NMOG credits

may also be disregarded.

(o) NMOG measurement. (1)

Manufacturers must measure NMOG

emissions in accordance with Part G of

the California Non-Methane Organic Gas

Test Procedures. These requirements are

incorporated by reference (see § 86.1).

(2) Manufacturers must not apply

reactivity adjustment factors (RAFs) to

NMOG measurements. See § 86.1841.

(p) In-use standards. (1) Table S04–10

of this paragraph (p) contains in-use

emission standards applicable only to

vehicles certified to the bins shown in

the table. These standards apply to inuse testing performed by the

manufacturer pursuant to regulations at

§§ 86.1845–01, 86.1845–04 and

86.1846–01 and to in-use testing

6862 Federal Register / Vol. 65, No. 28 / Thursday, February 10, 2000 / Rules and Regulations

performed by EPA. These standards do

not apply to certification or Selective

Enforcement Auditing. (2) These standards apply only to

LDV/LLDTs produced up through the

2008 model year, and HLDT/MDPVs

produced up through the 2010 model

year. These standards are subject to

other limitations described in paragraph

(p)(3) of this section. (3) For the first model year and also

for the next model year after that, in

which a test group of vehicles is

certified to a bin of standards to which

it has not previously been certified, the

standards in Table S04–10 of this

paragraph (p) apply for purposes of inuse testing only. The standards apply

equally to all LDV/Ts and MDPVs

subject to the model year limitation in

paragraph (p)(2) of this section. Table

S04–10 follows:

TABLE S04–10—IN-USE COMPLIANCE STANDARDS (G/MI)

[Certification standards shown for reference purposes]

Bin number Durability period (miles) NOX In-use NOX certification NMOG In-use NMOG certification

5 .............................. 50,000 0.07 0.05 n/a ........................... 0.075

5 .............................. 120,000 0.10 0.07 n/a ........................... 0.090

4 .............................. 120,000 0.06 0.04 n/a ........................... 0.070

3 .............................. 120,000 0.05 0.03 0.09 ......................... 0.055

2 .............................. 120,000 0.03 0.02 0.02 ......................... 0.010

(4) For diesel vehicles certified to bin

10, separate in-use standards apply for

NOX and PM emissions. These

standards are determined by

multiplying the applicable NOX and PM

certification standards by factors of 1.2

and 1.35, respectively, and then

rounding the result to one more decimal

place than contained in the certification

standard. The resultant standards do not

apply for certification or selective

enforcement auditing. (q) Hardship provision for small

volume manufacturers. (1) A small

volume manufacturer may apply for

relief from any applicable final phase-in

model year contained in this section.

Relief will only be available to defer

required compliance with a completely

new set of standards, a fleet average

NOX standard, and/or evaporative

emission standard for 100% of affected

vehicles for one model year. Thus, a

small volume manufacturer that obtains

relief may: (i) Defer 100% compliance with the

fleet average NOX standard for interim

LDV/LLDTs (0.30 g/mi) until 2005; (ii) Defer 100% compliance with the

evaporative emission standards and/or

fleet average NOX standard for Tier 2

LDV/LLDTs (0.07 g/mi) until 2008; (iii) Defer 100% compliance with the

requirements that interim HLDTs and

MDPVs comply with applicable

emission standards shown in Tables

S04–1 and S04–2, until 2005;

(iv) Defer 100% compliance with the

fleet average NOX standard for interim

HLDT/MDPVs (0.20 g/mi) until 2008;

and

(v) Defer 100% compliance with the

the evaporative emission standards and/

or fleet average NOX standard for Tier 2

HLDT/MDPVs (0.07 g/mi) until 2010. (2) Applications for relief must be in

writing and must: (i) Be submitted before the earliest

date of noncompliance;

(ii) Include evidence that the

manufacturer will incur severe

economic hardship if relief is not

granted; (iii) Include evidence that the

noncompliance will occur despite the

best efforts of the manufacturer to

comply; and (iv) Include evidence that the

manufacturer has made every

reasonable effort to purchase credits to

address the noncompliance, where

applicable. (r) NMOG standard adjustment for

direct ozone reducing devices. (1) A

manufacturer may obtain NMOG credit

for use in certifying to the exhaust

NMOG standards listed in paragraph (c)

of this section and for use in complying

with the in-use standards of paragraph

(p) of this section, where applicable.

This credit effectively allows the

manufacturer to increase the exhaust

NMOG emission standards listed in

these paragraphs by the amount of the

applicable credit. For example, if the

applicable NMOG credit was 0.01 g/mi,

and the vehicle was being certified in

Bin 5, as described in Table S04–1 of

paragraph (c) of this section, exhaust

NMOG emissions must be no greater

than 0.10 g/mi, as opposed to the

normal NMOG certification standard of

0.09 g/mi in Bin 5. (2) The NMOG credit must be

determined through a two-step process. (i) The first step must determine the

ozone reduction potential of the direct

ozone reducing device, the ozone

reduction potential of exhaust NMOG

reductions beyond Bin 5 of the Tier 2

standards, and the ratio of the two

methods of reducing ambient ozone

levels. The requirements for this step

are described in paragraph (r)(3) of this

section.

(ii) The second step must demonstrate

and certify the relevant performance

characteristics of the specific ozone

reducing device. The requirements for

this step are described in paragraph

(r)(4) of this section.

(3) The ozone reduction potential of

the direct ozone reducing device and

the ozone reduction potential of exhaust

NMOG reductions beyond Bin 5 of the

Tier 2 standards must be estimated

using procedures which are approved

by the Administrator in advance. At a

minimum:

(i) The modeling must utilize an

urban airshed model using up-to-date

chemical and meteorological simulation

techniques;

(ii) Four local areas must be modeled:

New York City, Chicago, Atlanta and

Houston;

(iii) The ozone episodes to be

modeled must meet the selection

criteria established by EPA for State

ozone SIPs;

(iv) Photochemical and dispersion

modeling must follow that used by EPA

to project the ozone impacts of this rule,

or its equivalent;

(v) Emission projections must be

made for calendar year 2007 and be

consistent with those used by EPA in

support of this final rule, or reflect

updates approved by EPA;

(vi) Baseline emissions (emissions

prior to use of the direct ozone reducing

device or the VOC emission reductions)

must include the benefits of the Tier 2

emission and sulfur standards; as well

as all other emission controls assumed

in EPA’s ozone modeling of the benefits

of the Tier 2 and sulfur standards, as

described in the Final Regulatory

Impact Analysis to the Tier 2 and Sulfur

Rule;

(vii) The ozone benefit of the direct

ozone reducing device must assume a

radiator area of 0.29 square meters, an

air flow velocity through the radiator of

40% of vehicle speed, and an ozone

reduction efficiency of 80%, or other

Federal Register / Vol. 65, No. 28 / Thursday, February 10, 2000 / Rules and Regulations 6863

values as approved by the

Administrator;

(viii) The ozone level of the air

entering the direct ozone reducing

device must be assumed to be 40% less

than that existing in the grid cell where

the vehicle is located;

(ix) The ozone benefit of VOC

emission reductions must be modeled

by assuming that all Tier 2 LDVs, LDTs

and MDPVs meet an exhaust NMOG

standard of 0.055 g/mi or lower instead

of a 0.09 g/mi NMOG standard;

(x) The ozone reducing device must

be assumed to be present on all of the

Tier 2 LDVs, LDTs and MDPVs modeled

as meeting the more stringent NMOG

standard described in paragraph

(r)(3)(ix) of this section;

(xi) The relationship between changes

in exhaust NMOG emission standards

and in-use VOC emissions must be

determined sufficiently far in the future

to ensure that the change in ozone being

modeled is sufficiently large to allow

comparison with the impact of the

ozone reducing device;

(xii) LDV, LDT and MDPV emissions

must be modeled using the updated Tier

2 emission model developed by EPA as

part of the Tier 2 rulemaking (available

from EPA upon request) or MOBILE6,

once this model is available;

(xiii) The ozone benefit of the direct

ozone reducing device must be the

reduction in the peak one-hour ozone

level anywhere in the modeled region

on the day when ozone is at its highest;

(xiv) The NMOG credit in each local

area must be the reduction in peak one

hour ozone associated with use of the

direct ozone reducing device divided by

the reduction in peak one hour ozone

associated with the more stringent

exhaust NMOG emission standard

multiplied by the reduction the exhaust

NMOG standard (in g/mi) modeled in

paragraph (r)(3)(ix) of this section; and

(xv) The NMOG credit applicable to

the generic direct ozone reducing device

modeled in paragraph (r)(3)(vii) of this

section must be determined by

arithmetically averaging the NMOG

credit determined in paragraph

(r)(3)(xiv) of this section for each of the

four local areas.

(4) The manufacturer must submit

data, using procedures which have been

approved by the Administrator in

advance, that demonstrate the following

aspects of the device being certified:

(i) The air flowrate through the device

as a function of vehicle speed;

(ii) The ozone reduction efficiency of

the device over the useful life of the

vehicle for a range of vehicle speeds and

ozone levels;

(iii) The method through which the

onboard diagnostic system will detect

improper performance.

(5) The NMOG credit for the specific

application of this technology tested

under the provisions of paragraph (r)(4)

of this section is the four-area NMOG

credit determined in paragraph (r)(3)(xv)

of this section scaled based on the

performance of the specific application

tested under the provisions of paragraph

(r)(4) of this section relative to those

assumed in paragraph (r)(3)(vii) of this

section. This scaling must assume a

linear relationship between the NMOG

credit and three aspects of the direct

ozone reducing device: radiator area,

average air flow through the radiator

relative to vehicle speed, and ozone

reduction efficiency and the NMOG

credit. The NMOG credit must be

rounded to the nearest 0.001 g/mi. For

example, if the NMOG credit

determined in paragraph (r)(3)(xv) of

this section was 0.01 g/mi and the

specific direct ozone reducing device

being certified had an area of 0.20

square meters, an air flow velocity of

30% of vehicle speed and an ozone

reducing efficiency of 70%, and the

generic ozone reducing device

simulated in the ozone model under

paragraph (r)(3)(vii) of this section had

an area of 0.29 square meters, an air

flow velocity of 40% of vehicle speed

and an ozone reducing efficiency of

80%, the NMOG credit applicable to the

specific device being certified would be:

0.01 g/mi * (0.20/0.29) * (30%/40%) *

70%/80%) = 0.005

25. Section 86.1812–01 is amended by

adding a sentence to the end of the

introductory text to read as follows:

§ 86.1812–01 Emission standards for lightduty trucks 1.

* * * This section does not apply to

2004 and later model year vehicles,

except as specifically referenced by

§ 86.1811–04.

* * * * *

26. Section 86.1813–01 is amended by

adding a sentence to the end of the

introductory text to read as follows:

§ 86.1813–01 Emission standards for lightduty trucks 2.

* * * This section does not apply to

2004 and later model year vehicles,

except as specifically referenced by

§ 86.1811–04.

* * * * *

27. Section 86.1814–02 is amended by

adding a sentence to the end of the

introductory text to read as follows:

§ 86.1814–02 Emission standards for lightduty trucks 3.

* * * This section does not apply to

2004 and later model year vehicles,

except as specifically referenced by

§ 86.1811–04.

* * * * *

§ 86.1814–04 [Removed]

28. Section 86.1814–04 is removed.

29. Section 86.1815–02 is amended by

adding a sentence to the end of the

introductory text to read as follows:

§ 86.1815–02 Emission standards for lightduty trucks 4.

* * * This section does not apply to

2004 and later model year vehicles,

except as specifically referenced by

§ 86.1811–04.

* * * * *

§ 86.1815–04 [Removed]

30. Section 86.1815–04 is removed.

31. Section 86.1824–01 is amended by

revising the first sentence of the

introductory text and adding paragraphs

(a)(2)(iii), (a)(2)(iv) and (a)(2)(v) to read

as follows:

§ 86.1824–01 Durability demonstration

procedures for evaporative emissions.

This section applies to gasoline-,

methanol-, liquefied petroleum gas-, and

natural gas-fueled LDV/Ts and MDPVs.

***

(a) * * *

(2) * * *

(iii) For gasoline fueled vehicles

certified to meet the evaporative

emission standards set forth in

§ 86.1811–04(e)(1), any service

accumulation method for evaporative

emissions must employ gasoline fuel for

the entire service accumulation period

which contains ethanol in, at least, the

highest concentration permissible in

gasoline under federal law and that is

commercially available in any state in

the United States. Unless otherwise

approved by the Administrator, the

manufacturer must determine the

appropriate ethanol concentration by

selecting the highest legal concentration

commercially available during the

calendar year before the one in which

the manufacturer begins its service

accumulation. The manufacturer must

also provide information acceptable to

the Administrator to indicate that the

service accumulation method is of

sufficient design, duration and severity

to stabilize the permeability of all nonmetallic fuel and evaporative system

components to the service accumulation

fuel constituents.

(iv) For flexible-fueled, dual-fueled,

multi-fueled, ethanol-fueled and

methanol-fueled vehicles certified to

6864 Federal Register / Vol. 65, No. 28 / Thursday, February 10, 2000 / Rules and Regulations

meet the evaporative emission standards

set forth in § 86.1811–04(e)(1), any

service accumulation method must

employ fuel for the entire service

accumulation period which the vehicle

is designed to use and which the

Administrator determines will have the

greatest impact upon the permeability of

evaporative and fuel system

components. The manufacturer must

also provide information acceptable to

the Administrator to indicate that the

service accumulation method is of

sufficient design, duration and severity

to stabilize the permeability of all nonmetallic fuel and evaporative system

components to service accumulation

fuel constituents.

(v) A manufacturer may use other

methods, based upon good engineering

judgment, to meet the requirements of

paragraphs (a)(2) (iii) and (iv) of this

section, as applicable. These methods

must be approved in advance by the

Administrator and meet the objectives

of paragraphs (a)(2) (iii) and (iv) of this

section, as applicable: to provide

assurance that the permeability of all

non-metallic fuel and evaporative

system components will not lead to

evaporative emission standard

exceedance under sustained exposure to

commercially available alcoholcontaining fuels for the useful life of the

vehicle.

* * * * *

32. Section 86.1827–01 is amended by

adding paragraph (e) to read as follows:

§ 86.1827–01 Test group determination.

* * * * *

(e) Unless otherwise approved by the

Administrator, a manufacturer of hybrid

electric vehicles must create separate

test groups based on both the type of

battery technology employed by the

HEV and upon features most related to

their exhaust emission characteristics.

33. Section 86.1829–01 is amended by

adding paragraphs (b)(1)(iii)(E) and (d)

to read as follows:

§ 86.1829–01 Durability and emission

testing requirements; waivers.

* * * * *

(b) * * * (1) * * *

(iii) * * *

(E) In lieu of testing a gasoline or

diesel fueled Tier 2 or interim non-Tier

2 vehicle for formaldehyde emissions

when such vehicles are certified based

upon NMHC emissions, a manufacturer

may provide a statement in its

application for certification that such

vehicles comply with the applicable

standards. Such a statement must be

based on previous emission tests,

development tests, or other appropriate

information.

* * * * *

(d)(1) Beginning in the 2004 model

year, the exhaust emissions must be

measured from all LDV/T exhaust

emission data vehicles tested in

accordance with the federal Highway

Fuel Economy Test (HWFET; 40 CFR

part 600, subpart B). The oxides of

nitrogen emissions measured during

such tests must be multiplied by the

oxides of nitrogen deterioration factor

computed in accordance with

§ 86.1823–01 and subsequent model

year provisions, and then rounded and

compared with the applicable emission

standard in § 86.1811–04. All data

obtained from the testing required under

this paragraph (d) must be reported in

accordance with the procedures for

reporting other exhaust emission data

required under this subpart.

(2) In the event that one or more

emission data vehicles fail the

applicable HWFET standard in

§ 86.1811–04, the manufacturer may

submit to the Administrator engineering

data or other evidence showing that the

system is capable of complying with the

standard. If the Administrator finds, on

the basis of an engineering evaluation,

that the system can comply with the

HWFET standard, he or she may accept

the information supplied by the

manufacturer in lieu of the test data.

(3) The provisions of paragraphs (d)(1)

and (d)(2) of this section do not apply

to MDPVs.

34. Section 86.1837–01 is amended by

designating the existing text as

paragraph (a) and by adding paragraph

(b) to read as follows:

§ 86.1837–01 Rounding of emission

measurements.

* * * * *

(b) Fleet average NOX value

calculations, where applicable, must be

rounded before comparing with the

applicable fleet average standard and

calculating credits generated or needed

as follows: manufacturers must round to

the same number of significant figures

that are contained in the quantity of

vehicles in the denominator of the

equation used to compute the fleet

average NOX emissions, but to no less

than one more decimal place than that

of the applicable fleet average standard.

35. Section 86.1838–01 is amended by

revising paragraphs (b)(1)(i) and

(c)(2)(iii) to read as follows:

§ 86.1838–01 Small volume manufacturer

certification procedures.

* * * * *

(b) * * *

(1) * * *

(i) The optional small-volume

manufacturers certification procedures

apply to LDV/Ts and MDPVs produced

by manufacturers with U.S. sales,

including all vehicles and engines

imported under provisions of 40 CFR

85.1505 and 85.1509 (for the model year

in which certification is sought) of fewer

than 15,000 units (LDV/Ts, MDPVs,

heavy-duty vehicles and heavy-duty

engines combined).

* * * * *

(c) * * *

(2) * * *

(iii) The provisions of § 86.1845–

01(c)(2) and § 86.1845–04(c)(2) that

require one vehicle of each test group

during high mileage in-use verification

testing to have a minimum odometer

mileage of 75 percent of the full useful

life mileage for Tier 1 and NLEV LDV/

Ts, or 90,000 (or 105,000) miles for Tier

2 and interim non-Tier 2 vehicles, do

not apply.

* * * * *

36. Section 86.1840–01 is amended by

adding paragraphs (c) and (d) to read as

follows:

§ 86.1840–01 Special test procedures.

* * * * *

(c) Manufacturers of vehicles

equipped with periodically regenerating

trap oxidizer systems must propose a

procedure for testing and certifying such

vehicles including SFTP testing for the

review and approval of the

Administrator. The manufacturer must

submit its proposal before it begins any

service accumulation or emission

testing. The manufacturer must provide

with its submittal, sufficient

documentation and data for the

Administrator to fully evaluate the

operation of the trap oxidizer system

and the proposed certification and

testing procedure.

(d) The provisions of paragraphs (a)

and (b) of this section also apply to

MDPVs.

37. Section 86.1841–01 is amended by

revising paragraph (a)(1)(iii) and adding

paragraph (e) to read as follows:

§ 86.1841–01 Compliance with emission

standards for the purpose of certification.

(a) * * *

(1) * * *

(iii) For the SFTP composite standard

of NMHC+NOX, the measured results of

NMHC and NOX must each be adjusted

by their corresponding deterioration

factors before the composite

NMHC+NOX certification level is

calculated. Where the applicable FTP

exhaust hydrocarbon emission standard

is an NMOG standard, the applicable

NMOG deterioration factor must be used

in place of the NMHC deterioration

Federal Register / Vol. 65, No. 28 / Thursday, February 10, 2000 / Rules and Regulations 6865

factor, unless otherwise approved by the

Administrator.

* * * * *

(e) Unless otherwise approved by the

Administrator, manufacturers must not

use Reactivity Adjustment Factors

(RAFs) in their calculation of the

certification levels of any pollutant,

regardless of the fuel used in the test

vehicle.

38. Section 86.1844–01 is amended by

adding new paragraphs (d)(15), (d)(16),

(e)(6) and (i) to read as follows:

§ 86.1844–01 Information requirements:

Application for certification and submittal of

information upon request.

* * * * *

(d) * * *

(15) For HEVs, unless otherwise

approved by the Administrator, the

information required by the ‘‘California

Exhaust Emission Standards and Test

Procedures for 2003 and Subsequent

Model Zero-Emission Vehicles, and

2001 and Subsequent Model Hybrid

Electric Vehicles, in the Passenger Car,

Light-Duty Truck and Medium-duty

Vehicle Classes’’ must be supplied.

These procedures are incorporated by

reference (see § 86.1).

(16) (i) For Tier 2 and interim nonTier 2 vehicles beginning with the 2004

model year, a statement indicating that

the manufacturer has conducted an

engineering analysis of the complete

exhaust system to ensure that the

exhaust system has been designed:

(A) To facilitate leak-free assembly,

installation and operation for the full

useful life of the vehicle; and

(B) To facilitate that such repairs as

might be necessary on a properly

maintained and used vehicle can be

performed in such a manner as to

maintain leak-free operation, using tools

commonly available in a motor vehicle

dealership or independent repair shop

for the full useful life of the vehicle.

(ii) The analysis must cover the

exhaust system and all related and

attached components including the air

injection system, if present, from the

engine block manifold gasket surface to

a point sufficiently past the last catalyst

and oxygen sensor in the system to

assure that leaks beyond that point will

not permit air to reach the oxygen

sensor or catalyst under normal

operating conditions.

(iii) A ‘‘leak-free’’ system is one in

which leakage is controlled so that it

will not lead to a failure of the

certification exhaust emission standards

in-use.

(iv) The provisions of paragraphs

(d)(16)(i) and (ii) do not apply to

vehicles whose certification is carried

over from the NLEV program or carried

across from the Cal LEV I program.

(e) * * *

(6) The NMOG/NMHC and HCHO to

NMHC ratios established according to

§ 86.1845–04.

* * * * *

(i) For exhaust emission testing for

Tier 2 and interim non-Tier 2 vehicles,

if approved by the Administrator in

advance, manufacturers may submit

exhaust emission test data generated

under California test procedures to

comply with any certification and inuse testing requirements under this

subpart. The Administrator may require

supporting information to establish that

differences between California and

Federal exhaust testing procedures and

fuels will not produce significant

differences in emission results. The

Administrator may require that in-use

testing be performed using Federal test

fuels as specified in § 86.113–04(a)(1).

39. Section 86.1845–04 is amended

by:

a. revising paragraph (a),

b. revising paragraph (c)(2), and

c. adding paragraph (f).

The revisions and additions read as

follows:

§ 86.1845–04 Manufacturer in-use

verification testing requirements

(a) General requirements. (1) A

manufacturer of LDVs, LDTs and/or

MDPVs must test, or cause to have

tested, a specified number of LDVs,

LDTs and MDPVs. Such testing must be

conducted in accordance with the

provisions of this section. For purposes

of this section, the term vehicle includes

light-duty vehicles, light-duty trucks

and medium-duty vehicles.

(2) Unless otherwise approved by the

Administrator, no emission

measurements made under the

requirements of this section may be

adjusted by Reactivity Adjustment

Factors (RAFs).

(3) Upon a manufacturer’s written

request, prior to in-use testing, that

presents information to EPA regarding

pre-conditioning procedures designed

solely to remove the effects of high

sulfur in gasoline from vehicles

produced through the 2007 model year,

EPA will consider allowing such

procedures on a case-by-case basis.

EPA’s decision will apply to

manufacturer in-use testing conducted

under this section and to any in-use

testing conducted by EPA.

* * * * *

(c) * * *

(2) Vehicle mileage:

(i) All test vehicles must have a

minimum odometer mileage of 50,000

miles. At least one vehicle of each test

group must have a minimum odometer

mileage of 75 percent of the full useful

life mileage. See § 86.1838–01(c)(2) for

small volume manufacturer mileage

requirements; or

(ii) For engine families certified for a

useful life of 150,000 miles, at least one

vehicle must have a minimum odometer

mileage of 105,000 miles. See

§ 86.1838–01(c)(2) for small volume

manufacturer mileage requirements.

* * * * *

(f)(1) A manufacturer may conduct inuse testing on a test group by measuring

NMHC exhaust emissions rather than

NMOG exhaust emissions. The

measured NMHC exhaust emissions

must be multiplied by the adjustment

factor used for certification of the test

group, or another adjustment factor

acceptable to the Administrator, to

determine the equivalent NMOG

exhaust emission values for the test

vehicle. The equivalent NMOG exhaust

emission value must be used in place of

the measured NMOG exhaust emission

value in determining the exhaust NMOG

results. The equivalent NMOG exhaust

emission values must be compared to

the NMOG exhaust emission standard

from the emission bin to which the test

group was certified.

(2) For flexible-fueled LDVs, LDTs

and MDPVs certified to NMOG

standards, the manufacturer may

request from the Administrator the use

of a methanol (M85) or ethanol (E85)

NMOG exhaust emission to gasoline

NMHC exhaust emission ratio which

must be established during certification

for each emission data vehicle for the

applicable test group. The results must

be submitted to the Administrator in the

Part II application for certification. After

approval by the Administrator, the

measured gasoline NMHC exhaust

emissions must be multiplied by the

M85 or E85 NMOG to gasoline NMHC

ratio submitted in the application for

certification for the test group to

determine the equivalent NMOG

exhaust emission values for the test

vehicle. The equivalent NMOG exhaust

emission value must be used in place of

the measured NMOG exhaust emission

value in determining the exhaust NMOG

results. The equivalent NMOG exhaust

emission values must be compared to

the NMOG exhaust emission standard

from the vehicle emission standard bin

to which the test group was certified.

(3) If the manufacturer measures

NMOG it must also measure and report

HCHO emissions. As an alternative to

measuring the HCHO content, if the

manufacturer measures NMHC as

permitted in paragraph (f)(1) of this

section, the Administrator may approve,

6866 Federal Register / Vol. 65, No. 28 / Thursday, February 10, 2000 / Rules and Regulations

upon submission of supporting data by

a manufacturer, the use of HCHO to

NMHC ratios. To request the use of

HCHO to NMHC ratios, the

manufacturer must establish during

certification testing the ratio of

measured HCHO exhaust emissions to

measured NMHC exhaust emissions for

each emission data vehicle for the

applicable test group. The results must

be submitted to the Administrator with

the Part II application for certification.

Following approval of the application

for certification, the manufacturer may

conduct in-use testing on the test group

by measuring NMHC exhaust emissions

rather than HCHO exhaust emissions.

The measured NMHC exhaust emissions

must be multiplied by the HCHO to

NMHC ratio submitted in the

application for certification for the test

group to determine the equivalent

HCHO exhaust emission values for the

test vehicle. The equivalent HCHO

exhaust emission values must be

compared to the HCHO exhaust

emission standard applicable to the test

group.

40. Section 86.1846–01 is amended by

revising paragraph (a) to read as follows:

§ 86.1846–01 Manufacturer in-use

confirmatory testing requirements.

(a) General requirements. (1) A

manufacturer of LDVs, LDTs and/or

MDPVs must test, or cause testing to be

conducted, under this section when the

emission levels shown by a test group

sample from testing under § 86.1845–01

exceeds the criteria specified in

paragraph (b) of this section. The testing

required under this section applies

separately to each test group and at each

test point (low and high mileage) that

meets the specified criteria. The testing

requirements apply separately for each

model year starting with model year

2001.

(2) Except for vehicles certified under

the NLEV provisions of subpart R of this

part or unless otherwise approved by

the Administrator, no emission

measurements made under the

requirements of this section may be

adjusted by Reactivity Adjustment

Factors (RAFs).

(3) For purposes of this section, the

term vehicle includes light-duty

vehicles, light-duty trucks and mediumduty vehicles.

(4) Upon a manufacturer’s written

request, prior to in-use testing, that

presents information to EPA regarding

pre-conditioning procedures designed

solely to remove the effects of high

sulfur in gasoline from vehicles

produced through the 2007 model year,

EPA will consider allowing such

procedures on a case-by-case basis.

EPA’s decision will apply to

manufacturer in-use testing conducted

under this section and to any in-use

testing conducted by EPA.

* * * * *

41. Section 86.1848–01 is amended by

adding paragraph (c)(7) to read as

follows:

§ 86.1848–01 Certification.

* * * * *

(c) * * *

(7) For Tier 2 and interim non-Tier 2

vehicles, all certificates of conformity

issued are conditional upon compliance

with all provisions of §§ 86.1811–04,

86.1860–04, 86.1861–04 and 86.1862–04

both during and after model year

production.

(i) Failure to meet the fleet average

NOX requirements of 0.07g/mi, 0.30 g/

mi or 0.20 g/mi, as applicable, will be

considered to be a failure to satisfy the

terms and conditions upon which the

certificate(s) was (were) issued and the

vehicles sold in violation of the fleet

average NOX standard will not be

covered by the certificate(s).

(ii) Failure to comply fully with the

prohibition against selling credits that it

has not generated or that are not

available, as specified in § 86.1861–04,

will be considered to be a failure to

satisfy the terms and conditions upon

which the certificate(s) was (were)

issued and the vehicles sold in violation

of this prohibition will not be covered

by the certificate(s).

(iii) Failure to comply fully with the

phase-in requirements of § 86.1811–04,

will be considered to be a failure to

satisfy the terms and conditions upon

which the certificate(s) was (were)

issued and the vehicles sold which do

not comply with Tier 2 or interim nonTier 2 requirements, up to the number

needed to comply, will not be covered

by the certificate(s).

(iv) For paragraphs (c)(7)(i) through

(iii) of this section:

(A) The manufacturer must bear the

burden of establishing to the satisfaction

of the Administrator that the terms and

conditions upon which the certificate(s)

was (were) issued were satisfied.

(B) For recall and warranty purposes,

vehicles not covered by a certificate of

conformity will continue to be held to

the standards stated or referenced in the

certificate that otherwise would have

applied to the vehicles.

* * * * *

42. Sections 86.1854 through 86.1859

are added and reserved.

43. Section 86.1860–04 is added to

read as follows:

§ 86.1860–04 How to comply with the Tier

2 and interim non-Tier 2 fleet average NOX

standards.

(a) The fleet average standards

referred to in this section are the

corporate fleet average standards for

FTP exhaust NOX emissions set forth in:

§ 86.1811–04(d) for Tier 2 LDV/Ts and

MDPVs (0.07 g/mi); § 86.1811–04(l)(3)

for interim non-Tier 2 LDV/LLDTs (0.30

g/mi); and, § 86.1811–04(l)(3) for

interim non-Tier 2 HLDT/MDPVs (0.20

g/mi). Unless otherwise indicated in

this section, the provisions of this

section apply to all three corporate fleet

average standards, except that the

interim non-Tier 2 fleet average NOX

standards do not apply to a

manufacturer whose U.S. LDV/T and

MDPV sales are 100% Tier 2 LDV/Ts

and MDPVs.

(b)(1) Each manufacturer must comply

with the applicable fleet average NOX

standard, or standards, on a sales

weighted average basis, at the end of

each model year, using the procedure

described in this section.

(2) During a phase-in year, the

manufacturer must comply with the

applicable fleet average NOX standard

for the required phase-in percentage for

that year as specified in § 86.1811–

04(k)(1), or for the alternate phase-in

percentage as permitted under

§ 86.1811–04(k)(6).

(c)(1)(i) Each manufacturer must

separately compute the sales weighted

averages of the individual NOX emission

standards to which it certified all its

Tier 2 vehicles, interim non-Tier 2 LDV/

LLDTs, and interim non-Tier 2 HLDT/

MDPVs of a given model year as

described in § 86.1804(l)(2).

(ii) For model years up to and

including 2008, manufacturers must

compute separate NOX fleet averages for

Tier 2 LDV/LLDTs and Tier 2 HLDT/

MDPVs.

(2)(i) For model years up to and

including 2008, if a manufacturer

certifies its entire U.S. sales of Tier 2 or

interim non-Tier 2 LDV/LLDTs or

interim non-Tier 2 HLDT/MDPVs, to

full useful life bins having NOX

standards at or below the applicable

fleet average NOX standard, that

manufacturer may elect not to compute

a fleet average NOX level for that

category of vehicles. A manufacturer

making such an election must not

generate NOX credits for that category of

vehicles for that model year.

(ii) For model years after 2008, if a

manufacturer certifies its entire U.S.

sales of Tier 2 vehicles to full useful life

bins having NOX standards at or below

0.07 gpm, that manufacturer may elect

not to compute a fleet average NOX level

for its Tier 2 vehicles. A manufacturer

Federal Register / Vol. 65, No. 28 / Thursday, February 10, 2000 / Rules and Regulations 6867

making such an election must not

generate NOX credits for that model

year.

(d) The sales weighted NOX fleet

averages determined pursuant to

paragraph (c) of this section must be

compared with the applicable fleet

average standard; 0.07 g/mi for NOX for

Tier 2 LDV/Ts and MDPVs, 0.30 g/mi

for NOX for interim non-Tier 2 LDV/

LLDTs, and 0.20 g/mi for NOx for

interim non-Tier 2 HLDT/MDPVs. Each

manufacturer must comply on an

annual basis with the fleet average

standards by:

(1) Showing that its sales weighted

average NOX emissions of its LDV/

LLDTs, HLDT/MDPVs or LDV/Ts, as

applicable, are at or below the

applicable fleet average standard; or

(2) If the sales weighted average is not

at or below the applicable fleet average

standard, by obtaining and applying

sufficient Tier 2 NOX credits, interim

non-Tier 2 LDV/LLDT NOX credits or

interim non-Tier 2 HLDT/MDPV NOX

credits, as appropriate, and as permitted

under § 86.1861–04.

(i) Manufacturers may not use NMOG

credits generated under the NLEV

program in subpart R of this part to meet

any Tier 2 or interim non-Tier 2 NOX

fleet average standard.

(ii) Tier 2 NOX credits may not be

used to meet any fleet average interim

non-Tier 2 NOX standard except as

permitted by § 86.1860–04(e)(1).

(iii) Interim non-Tier 2 NOX credits

may not be used to meet the Tier 2 fleet

average NOX standard.

(iv) Interim non-Tier 2 NOX credits

from HLDT/MDPVs may not be used to

meet the fleet average NOX standard for

interim non-Tier 2 LDV/LLDTs, and

interim non-Tier 2 credits from LDV/

LLDTs may not be used to meet the fleet

average NOX standard for interim nonTier 2 HLDT/MDPVs.

(e) (1) Manufacturers that cannot meet

the requirements of paragraph (d) of this

section, may carry forward a credit

deficit for three model years, but must

not carry such deficit into the fourth

year. When applying credits to reduce

or eliminate a deficit under the fleet

average standard for interim LDV/

LLDTs or interim HLDT/MDPVs, that

has been carried forward into a year

subsequent to its generation, a

manufacturer may apply credits from

Tier 2 LDV/LLDTs or Tier 2 HLDT/

MDPVs, respectively, as well as from

the appropriate group of interim

vehicles. A manufacturer must not use

interim credits to reduce or eliminate

any NOX credit deficit under the Tier 2

fleet average standard.

(2) A manufacturer carrying a credit

deficit into the third year must generate

or obtain credits to offset that deficit

and apply them to the deficit at a rate

of 1.2:1, (i.e. deficits carried into the

third model year must be repaid with

credits equal to 120 percent of the

deficit).

(3) A manufacturer must not bank

credits for future model years or trade

credits to another manufacturer during

a model year into which it has carried

a deficit.

(f) Computing fleet average NOX

emissions. (1) Manufacturers must

separately compute these fleet NOX

averages using the equation contained

in paragraph (f)(2) of this section:

(i) Their Tier 2 LDV/LLDT and Tier 2

HLDT/MDPV fleet average NOX

emissions for each model year through

2008;

(ii) Their combined Tier 2 LDV/T and

MDPV fleet average NOX emissions for

each model year after 2008;

(iii) Their interim non-Tier 2 LDV/

LLDT fleet average NOX emissions for

each model year through 2006; and

(iv) Their interim non-Tier 2 HLDT/

MDPV fleet average NOX emissions for

each model year through 2008.

(2) The equation for computing fleet

average NOX emissions is as follows:

(

( . .,

/ ,

N NO

e g

HLDT MDPVs

∑ × X emission standard)

Total number of vehicles of the appropriate category

 all LDV/Ts and MDPVs, or interim non-Tier 2

 etc.) sold including HEVs and ZEVs

Where:

N = The number of vehicles sold in the

applicable category that were

certified for each corresponding

NOX emission bin. N must be based

on vehicles counted to the point of

first sale.

Emission standard = The individual full

useful life NOX emission standard

for each bin for which the

manufacturer had sales.

(3) The results of the calculation in

paragraph (f)(2) of this section must be

rounded as required by § 86.1837–01.

(4) When approved in advance by the

Administrator, the numerator in the

equation in paragraph (f)(2) of this

section may be adjusted downward by

the product of the number of HEVs from

each NOX emission bin times a HEV

NOX contribution factor determined

through mathematical estimation of the

reduction in NOX emissions over the

test procedure used to certify the HEVs.

The reduction in NOX emissions must

be determined using good engineering

judgement and reflect the relation in

actual full useful life NOX emissions to

the full useful life NOX standards for the

certification bin applicable to the

vehicles. The Administrator may require

that calculation of the HEV NOX

contribution factor include vehicle

parameters such as vehicle weight,

portion of time during the test

procedure that the HEV operates with

zero exhaust emissions, zero emission

range, NOX emissions from fuel-fired

heaters and NOX emissions from

electricity production and storage.

(g) Additional credits for vehicles

certified to 150,000 mile useful lives. (1)

A manufacturer may certify any test

group to an optional useful life of 15

years or 150,000 miles, whichever

occurs first.

(2)(i) For any test group certified to

the optional 15 year/150,000 mile useful

life, the manufacturer may generate

additional NOX credits, except as

prohibited in paragraph (g)(3) of this

section.

(ii) The manufacturer must calculate

these extra NOX credits, where

permitted, by substituting an adjusted

NOX standard for the applicable NOX

standard from the full useful life

certification bin when it calculates the

applicable fleet average NOX emissions

by the procedure in paragraph (f) of this

section. The adjusted standard must be

equal to the applicable full useful life

NOX standard multiplied by 0.85 and

rounded to the same number of decimal

places as the applicable full useful life

NOX standard.

(3) A manufacturer electing not to

comply with applicable intermediate

life standards as permitted under

§ 86.1811–04(c)(4) may not generate

additional credits from vehicles

certified to a useful life of 15 years/

150,000 miles; except that, for bins

where such intermediate life standards

do not exist or are specifically deemed

to be optional in § 86.1811–04(c)(4), the

manufacturer may generate additional

6868 Federal Register / Vol. 65, No. 28 / Thursday, February 10, 2000 / Rules and Regulations

NOX credits from vehicles certified to a

useful life of 15 years/150,000 miles.

(h) Additional credits for vehicles

certified to low bins. A manufacturer

may obtain additional NOX credits by

certifying vehicles to bins 1 and/or 2 in

model years from 2001 through 2005

subject to the following requirements:

(1) When computing the fleet average

Tier 2 NOX emissions using the formula

in paragraph (f)(2) of this section, the

manufacturer may multiply the number

(N) of vehicles certified to bins 1 and 2

by the applicable multiplier shown in

Table S04–11. These multipliers may

not be used after model year 2005. The

table follows:

TABLE S04–11—MULTIPLIERS FOR ADDITIONAL TIER 2 NOX Credits for

Bin 1 and 2 LDV/Ts.

Bin Model year Multiplier

2 ..... 2001, 2002, 2003,

2004, 2005.

1.5

1 ..... 2001, 2002, 2003,

2004, 2005.

2.0

(2) [Reserved]

44. Section 86.1861–04 is added to

read as follows:

§ 86.1861–04 How do the Tier 2 and interim

non-Tier 2 NOX averaging, banking and

trading programs work?

(a) General provisions for Tier 2

credits and debits. (1) A manufacturer

whose Tier 2 fleet average NOX

emissions exceeds the 0.07 g/mile

standard must complete the calculation

at paragraph (b) of this section to

determine the size of its NOX credit

deficit. A manufacturer whose Tier 2

fleet average NOX emissions is less than

or equal to the 0.07 g/mile standard

must complete the calculation in

paragraph (b) of this section if it desires

to generate NOX credits. In either case,

the number of credits or debits

determined in the calculation at

paragraph (b) of this section must be

rounded to the nearest whole number.

(2) Credits generated according to the

calculation in paragraph (b)(1) of this

section may be banked for future use or

traded to another manufacturer.

(3) NOX credits are not subject to any

discount or expiration date except as

required under the deficit carryforward

provisions of § 86.1860–04(e)(2).

(4) If a manufacturer calculates that it

has negative credits (debits or a credit

deficit) for a given model year, it must

obtain sufficient credits, as required

under § 86.1860–04(e)(2), from vehicles

produced by itself or another

manufacturer in a model year no later

than the third model year following the

model year for which it calculated the

credit deficit. (Example: if a

manufacturer calculates that it has a

NOX credit deficit for the 2008 model

year, it must obtain sufficient NOX

credits to offset that deficit from its own

production or that of other

manufacturers’ 2011 or earlier model

year vehicles.) (5) A small volume manufacturer that

has opted not to meet all phase-in

requirements as permitted under

§ 86.1811–04(k)(5), must:

(i) Demonstrate compliance or obtain

appropriate credits to comply with the

0.30 g/mi. fleet average NOX standard

for interim LDV/LLDTs for 100% of its

LDV/LLDTs in 2004, in order to carry

forward a credit deficit for later model

year interim LDV/LLDTs; and (ii) Demonstrate compliance or obtain

appropriate credits to comply with the

0.07 g/mi. fleet average NOX standard

for 100% of its LDV/LLDTs in 2007, in

order to carry forward a credit deficit for

later model year Tier 2 LDV/LLDTs; and (iii) Demonstrate compliance or

obtain appropriate credits to comply

with the 0.20 g/mi. fleet average interim

NOX standard for 100% of its HLDT/

MDPVs in 2007, in order to carry

forward a credit deficit for later model

year interim HLDT/MDPVs. (6)(i) Manufacturers may not use NOX

credits to comply with the NLEV

requirements of subpart R of this part. (ii) Manufacturers may not use NMOG

credits generated by vehicles certified to

the NLEV requirements of subpart R of

this part to comply with any NOX

requirements of this subpart. (iii) Manufacturers may not use NOX

credits generated by interim non-Tier 2

vehicles to comply with the fleet

average NOX standard for Tier 2

vehicles.

(iv) Manufacturers may not use NOX

credits generated by Tier 2 vehicles to

comply with any fleet average NOX

standard for interim non-Tier 2 vehicles,

except as permitted under § 86.1860–

04(e).

(v) Manufacturers may not use NOX

credits generated by interim non-Tier 2

LDV/LLDTs to comply with the fleet

average NOX standard for interim nonTier 2 HLDT/MDPVs.

(vi) Manufacturers may not use NOX

credits generated by interim non-Tier 2

HLDT/MDPVs to comply with the fleet

average NOX standard for interim nonTier 2 LDV/LLDTs.

(vii) Manufacturers may not use NOX

credits generated by Tier 2 LDV/LLDTs

to comply with the Tier 2 NOX average

standard for HLDT/MDPVs before the

2009 model year. (viii) Manufacturers may not use NOX

credits generated by Tier 2 HLDT/

MDPVs to comply with the Tier 2 NOX

average standard for LDV/LLDTs before

the 2009 model year. (7) Manufacturers may bank Tier 2

NOX credits for later use to meet the

Tier 2 fleet average NOX standard or

trade them to another manufacturer.

Credits are earned on the last day of the

model year. Before trading or carrying

over credits to the next model year, a

manufacturer must apply available

credits to offset any credit deficit, where

the deadline to offset that credit deficit

has not yet passed.

(8) There are no property rights

associated with NOX credits generated

under this subpart. Credits are a limited

authorization to emit the designated

amount of emissions. Nothing in this

Part or any other provision of law

should be construed to limit EPA’s

authority to terminate or limit this

authorization through a rulemaking.

(b) Calculating Tier 2 credits and

debits. (1) Manufacturers that achieve

fleet average NOX values from the

calculation in § 86.1860–04(f), lower

than the applicable fleet average NOX

standard, may generate credits for a

given model year, in units of vehicle-g/

mi NOX, determined in this equation:

[(Fleet Average NOX

Standard)¥(Manufacturer’s Fleet

Average NOX Value)] + (Total number of

Tier 2 Vehicles Sold, Including ZEVs

and HEVs)

Where: The number of Tier 2 vehicles

sold is based on the point of first sale

and does not include vehicles sold in

California or a state that adopts, and has

in effect for that model year, California

emission requirements.

(2) Where the result of the calculation

in paragraph (b)(1) of this section is a

negative number, the manufacturer must

generate negative NOX credits (debits).

(c) Early banking. (1)(i) Manufacturers

may certify LDV/LLDTs to the Tier 2

FTP exhaust standards in § 86.1811–04

for model years 2001–2003 in order to

bank credits for use in the 2004 and

later model years. Such vehicles must

also meet SFTP exhaust emission

standards specified in § 86.1811–04.

(ii) Manufacturers may certify HLDT/

MDPVs to the Tier 2 FTP exhaust

standards in § 86.1811–04 for model

years 2001–2007 in order to bank credits

for use in the 2008 and later model

years. Such vehicles must also meet

applicable SFTP exhaust emission

standards specified in § 86.1811–04.

(iii) This process is referred to as

‘‘early banking’’ and the resultant

credits are referred to as ’’early credits’’.

In order to bank early credits, a

manufacturer must comply with all

exhaust emission standards and

requirements applicable to Tier 2 LDV/

LLDTs and/or HLDT/MDPVs, as

applicable, except as allowed under

paragraph (c)(4) of this section.

(2) To generate early credits, a

manufacturer must separately compute

Federal Register / Vol. 65, No. 28 / Thursday, February 10, 2000 / Rules and Regulations 6869

the sales weighted NOX average of the

LDV/LLDTs and HLDT/MDPVs it

certifies to the Tier 2 exhaust

requirements and separately compute

credits using the calculations in this

section and in § 86.1860–04.

(3) Early HLDT/MDPV credits may

not be applied to LDV/LLDTs before the

2009 model year. Early LDV/LLDT

credits may not be applied to HLDT/

MDPVs before the 2009 model year.

(4) Manufacturers may generate early

Tier 2 credits from LDVs, LDT1s and

LDT2s that are certified to a full useful

life of 100,000 miles, provided that the

credits are prorated by a multiplicative

factor of 0.833 (the quotient of 100,000/

120,000). Where a manufacturer has

both 100,000 and 120,000 mile full

useful life vehicles for which it desires

to bank early credits, it must compute

the credits from each group of vehicles

separately and then add them together.

(5) Manufacturers may bank early

credits for later use to meet the Tier 2

fleet average NOX standard or trade

them to another manufacturer subject to

the restriction in paragraph (c)(3) of this

section.

(6) Early credits must not be used to

comply with the fleet average NOX

standards for interim non-Tier 2

vehicles.

(7) Nothing in this section prevents

the use of the NMOG values of 2003 and

earlier model year LDV/LLDTs from

being used in calculations of the NMOG

fleet average and subsequent NMOG

credit generation, under subpart R of

this part.

(d) Reporting and recordkeeping for

Tier 2 NOX credits including early

credits. Each manufacturer must comply

with the reporting and recordkeeping

requirements of § 86.1862–04.

(e) Fleet average NOX debits. (1)

Manufacturers must offset any debits for

a given model year by the fleet average

NOX reporting deadline for the third

model year following the model year in

which the debits were generated as

required in § 86.1860.04(e)(2).

Manufacturers may offset debits by

generating credits or acquiring credits

generated by another manufacturer.

(2)(i) Failure to meet the requirements

of paragraphs (a) through (d) of this

section and of this paragraph (e), within

the required timeframe for offsetting

debits will be considered to be a failure

to satisfy the conditions upon which the

certificate(s) was issued and the

individual noncomplying vehicles not

covered by the certificate must be

determined according to this section.

(ii) If debits are not offset within the

specified time period, the number of

vehicles not meeting the fleet average

NOX standards and not covered by the

certificate must be calculated by

dividing the total amount of debits for

the model year by the fleet average NOX

standard applicable for the model year

in which the debits were first incurred.

(iii) EPA will determine the vehicles

for which the condition on the

certificate was not satisfied by

designating vehicles in those test groups

with the highest certification NOX

emission values first and continuing

until a number of vehicles equal to the

calculated number of noncomplying

vehicles as determined above is

reached. If this calculation determines

that only a portion of vehicles in a test

group contribute to the debit situation,

then EPA will designate actual vehicles

in that test group as not covered by the

certificate, starting with the last vehicle

produced and counting backwards.

(3) If a manufacturer ceases

production of LDV/Ts and MDPVs or is

purchased by, merges with or otherwise

combines with another manufacturer,

the manufacturer continues to be

responsible for offsetting any debits

outstanding within the required time

period. Any failure to offset the debits

will be considered to be a violation of

paragraph (e)(1) of this section and may

subject the manufacturer to an

enforcement action for sale of vehicles

not covered by a certificate, pursuant to

paragraph (e)(2) of this section.

(4) For purposes of calculating the

statute of limitations, a violation of the

requirements of paragraph (e)(1) of this

section, a failure to satisfy the

conditions upon which a certificate(s)

was issued and hence a sale of vehicles

not covered by the certificate, all occur

upon the expiration of the deadline for

offsetting debits specified in paragraph

(e)(1) of this section.

(f) NOX credit transfers. (1) EPA may

reject NOX credit transfers if the

involved manufacturers fail to submit

the credit transfer notification in the

annual report.

(2) A manufacturer may not sell

credits that are not available for sale

pursuant to the provisions in paragraphs

(a)(2) and (a)(7) of this section.

(3) In the event of a negative credit

balance resulting from a transaction,

both the buyer and seller are liable,

except in cases involving fraud. EPA

may void ab initio the certificates of

conformity of all engine families

participating in such a trade.

(4)(i) If a manufacturer transfers a

credit that it has not generated pursuant

to paragraph (b) of this section or

acquired from another party, the

manufacturer will be considered to have

generated a debit in the model year that

the manufacturer transferred the credit.

The manufacturer must offset such

debits by the deadline for the annual

report for that same model year.

(ii) Failure to offset the debits within

the required time period will be

considered a failure to satisfy the

conditions upon which the certificate(s)

was issued and will be addressed

pursuant to paragraph (e) of this section.

(g) Interim non-Tier 2 NOX credits and

debits; Interim non-Tier 2 averaging,

banking and trading. Interim non-Tier 2

NOX credits must be generated,

calculated, tracked, averaged, banked,

traded, accounted for and reported upon

separately from Tier 2 credits. The

provisions of this section applicable to

Tier 2 NOX credits and debits and Tier

2 averaging banking and trading are

applicable to interim non-Tier 2 LDV/

LLDTs and interim non-Tier 2 HLDT/

MDPVs with the following exceptions:

(1) Provisions for early banking under

paragraph (c) of this section do not

apply.

(2) The fleet average NOX standard

used for calculating credits is 0.30

grams per mile for interim non-Tier 2

LDV/LLDTs and 0.20 g/mi for interim

non-Tier 2 HLDT/MDPVs. (The interim

non-Tier 2 NOX standard of 0.30 (or

0.20) g/mi replaces 0.07 in the text and

calculation in this section.)

(3) Interim non-Tier 2 NOX credit

deficits may be carried forward for three

years subject to the requirements of

§ 86.1860–04(e).

45. Section 86.1862–04 is added to

read as follows:

§ 86.1862–04 Maintenance of records and

submittal of information relevant to

compliance with fleet average NOX

standards.

(a) Maintenance of records. (1) The

manufacturer producing any light-duty

vehicles and/or light-duty trucks subject

to the provisions in this subpart must

establish, maintain, and retain the

following information in adequately

organized and indexed records for each

model year:

(i) Model year;

(ii) Applicable fleet average NOX

standard: 0.07g/mi for Tier 2 LDV/Ts;

0.30 g/mi for interim non-Tier 2 LDV/

LLDTs; or 0.20 g/mi for interim non-Tier

2 HLDT/MDPVs;

(iii) Fleet average NOX value

achieved; and

(iv) All values used in calculating the

fleet average NOX value achieved.

(2) The manufacturer producing any

LDV/Ts or MDPVs subject to the

provisions in this subpart must

establish, maintain, and retain the

following information in adequately

organized and indexed records for each

LDV/T or MDPV subject to this subpart:

(i) Model year;

6870 Federal Register / Vol. 65, No. 28 / Thursday, February 10, 2000 / Rules and Regulations

(ii) Applicable fleet average NOX

standard;

(iii) EPA test group;

(iv) Assembly plant;

(v) Vehicle identification number;

(vi) NOX standard to which the LDV/

T or MDPV is certified; and

(vii) Information on the point of first

sale, including the purchaser, city, and

state.

(3) The manufacturer must retain all

records required to be maintained under

this section for a period of eight years

from the due date for the annual report.

Records may be retained as hard copy

or reduced to microfilm, ADP diskettes,

and so forth, depending on the

manufacturer’s record retention

procedure; provided, that in every case

all information contained in the hard

copy is retained.

(4) Nothing in this section limits the

Administrator’s discretion to require the

manufacturer to retain additional

records or submit information not

specifically required by this section.

(5) Pursuant to a request made by the

Administrator, the manufacturer must

submit to the Administrator the

information that the manufacturer is

required to retain.

(6) EPA may void ab initio a

certificate of conformity for a vehicle

certified to emission standards as set

forth or otherwise referenced in this

subpart for which the manufacturer fails

to retain the records required in this

section or to provide such information

to the Administrator upon request.

(b) Reporting. (1) Each covered

manufacturer must submit an annual

report. Except as provided in paragraph

(b)(2) of this section, the annual report

must contain, for each applicable fleet

average NOX standard, the fleet average

NOX value achieved, all values required

to calculate the NOX value, the number

of credits generated or debits incurred,

and all the values required to calculate

the credits or debits. The annual report

must contain the resulting balance of

credits or debits.

(2) When a manufacturer calculates

compliance with the fleet average NOX

standard using the provisions in

§ 86.1860–04(c)(2), then the annual

report must state that the manufacturer

has elected to use such provision and

must contain the fleet average NOX

standard as the fleet average NOX value

for that model year.

(3) For each applicable fleet average

NOX standard, the annual report must

also include documentation on all credit

transactions the manufacturer has

engaged in since those included in the

last report. Information for each

transaction must include:

(i) Name of credit provider;

(ii) Name of credit recipient;

(iii) Date the transfer occurred;

(iv) Quantity of credits transferred;

and

(v) Model year in which the credits

were earned.

(4) Unless a manufacturer reports the

data required by this section in the

annual production report required

under § 86.1844–01(e) and subsequent

model year provisions, a manufacturer

must submit an annual report for each

model year after production ends for all

affected vehicles and trucks produced

by the manufacturer subject to the

provisions of this subpart and no later

than May 1 of the calendar year

following the given model year. Annual

reports must be submitted to: Director,

Vehicle Programs and Compliance

Division, U.S. Environmental Protection

Agency, 2000 Traverwood, Ann Arbor,

Michigan 48105.

(5) Failure by a manufacturer to

submit the annual report in the

specified time period for all vehicles

and trucks subject to the provisions in

this section is a violation of section

203(a)(1) of the Clean Air Act for each

subject vehicle and truck produced by

that manufacturer.

(6) If EPA or the manufacturer

determines that a reporting error

occurred on an annual report previously

submitted to EPA, the manufacturer’s

credit or debit calculations will be

recalculated. EPA may void erroneous

credits, unless transferred, and must

adjust erroneous debits. In the case of

transferred erroneous credits, EPA must

adjust the selling manufacturer’s credit

or debit balance to reflect the sale of

such credits and any resulting

generation of debits.

(c) Notice of opportunity for hearing.

Any voiding of the certificate under

paragraph (a)(6) of this section will be

made only after EPA has offered the

manufacturer concerned an opportunity

for a hearing conducted in accordance

with § 86.614 for light-duty vehicles or

§ 86.1014 for light-duty trucks and, if a

manufacturer requests such a hearing,

will be made only after an initial

decision by the Presiding Officer.

[FR Doc. 00–19 Filed 2–9–00; 8:45 am]

BILLING CODE 6560–50–P